Fiscal Policy
What type of fiscal policy will help pay off the national debt?
Contractionary fiscal policy
Who holds the primary power to increase or decrease the monetary supply in the U.S.?
The Federal Reserve
Define proportional tax
Tax rate is the same for everyone
What economist famously supported "demand-side theory" (expansionary fiscal & monetary policy) as a cure for recessions?
What type of fiscal policy will the government implement during a recession?
Expansionary
If the Federal Reserve believed the U.S. economy was entering a recession, what action would it most likely take regarding interest rates, and why?
Lower interest rates to encourage spending
Define regressive tax
Tax rate decreases as income increases
What type of money does the US use?
Fiat
What tools does the federal government have to manage the economy through fiscal policy?
Taxing and spending
What are Open Market Operations, and what effect do they have on the economy?
Buying/selling bonds -> changes money supply
Define tariff
A tax on imports
What is the general term for social welfare programs that people are entitled to benefit from if they meet certain eligibility requirements?
Entitlements
If the government lowers personal income tax rates, why is this expected to promote economic growth?
People would have more money to spend on goods and services
Apart from controlling monetary policy, what is another role of the Fed?
Check clearing
OR
Regulating banks
OR
Lender of last resort
Define indirect tax
A tax levied on one party but paid by another party. (e.g sales tax that is passed on to the consumer)
Why did the US move away from the gold standard?
To be able to control the money supply & value of money
What is a source of a government's "receipts"
Taxes
What are the two main economic goals of the Federal Reserve?
Promote full employment
Maintain low inflation
Define progressive tax
Tax rate increases as income increases
Which economic school follows the ideas of Adam Smith?
Classical economics