The Federal Budget
What is the written estimate of total federal revenue and spending for the year?
What is the Federal Budget?
What are the two main tools of fiscal policy?
What are government spending and taxation?
Who is responsible for conducting monetary policy in the U.S.?
What is the Federal Reserve (The Fed)?
Which economic theory believes the market will self-correct without government intervention?
What is Classical Economics?
What is it called when the government spends more than it earns in revenue?
What is a budget deficit?
Which office is responsible for reviewing and adjusting agency budget estimates before sending the budget to Congress?
What is the Office of Management and Budget (OMB)?
What is the goal of expansionary fiscal policy?
What is to stimulate economic growth?
What tool does the Fed use most frequently to influence the money supply?
What are Open Market Operations?
What ideas are Keynesian Economics based on ?
Government spending can be necessary to stimulate an economy when private industry has no incentive to spend.
What is the national debt?
What is the total money owed to bondholders by the federal government?
What does Congress use to review the federal budget?
What is the Congressional Budget Office?
When the government cuts spending and raises taxes, which type of policy is being used?
What is contractionary fiscal policy?
What happens to the money supply when the reserve requirement is reduced?
It increases, because banks can lend out more money.
What does the Multiplier Effect suggest about government spending?
That each dollar spent can increase GDP by more than one dollar.
How does selling government bonds affect private investment?
It can crowd out private investment by diverting funds from the private sector.
What happens if the President vetoes an appropriation bill?
It does not become law unless Congress overrides the veto.
Why is fiscal policy often unpopular?
Because it involves making changes to taxes and spending that may not benefit everyone.
What does a decrease in the discount rate usually lead to?
Lower interest rates and increased borrowing.
What’s a key principle of Supply-Side Economics?
Reducing taxes and regulation encourages business investment and job creation.
What are two ways the government can cover a deficit?
Borrowing money or increasing the money supply?
What is the process by which individual agency budgets are combined into one document for Congressional review?
What is the creation of the Federal Budget?
Why can it be difficult to plan the correct fiscal policy in advance?
Because the economy and business cycle may change before the policy takes effect.
What are the “inside lag” and “outside lag” in monetary policy?
Inside lag is the delay in recognizing a problem; outside lag is the time it takes for policy to take effect.
Name one historical event that challenged Classical Economics and led to new ideas on the function of the economy.
What is the Great Depression?
Compare and contrast federal debt and personal debt.
Both involve borrowing and repayment with interest, but federal debt is long-term, often held by other countries and citizens, and doesn't need to be paid off all at once like personal debt.