Download Study Guide - Module 30 What is discretionary fiscal policy? How

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Study Guide - Module 30
What is discretionary fiscal policy? How can it be used to stabilize an
economy in the short run (describe both times of recession and times of
What is the equation for the budget balance, otherwise known as savings by
government? What does each part mean? How do expansionary and contractionary
policies affect it?
Explain two reasons why the budget balance is not a good measure of fiscal policy.
What is the historical relationship between the budget balance and the business
cycle? Relate this to both GDP and Unemployment. What is this relationship
caused by? Why/how?
Business cycle effects on the budget balance are short run or temporary. Why?
What does it mean to separate the effect of the business cycle from the effects
of discretionary fiscal policy on the budget balance? What does this give
insight into?
Define the cyclically adjusted budget balance.
Explain why most economists believe that a balanced budget, forced by law, would
be a bad idea.
Define fiscal year and public debt.
Describe the problems posed by rising government debt.
Why can't a government just print more money to pay its bills?
What measure do we use to assess the ability of a government to pay
its debt? Why do we use that measure? What does it tell us?
Define implicit liabilities. How do these make the US's budget situation look
concerning, even alarming?
What are the US's three largest implicit liabilities?
What are dedicated taxes? How do these explain the difference between total
debt and the amount owed to the public?
(Likewise, what is the social security trust fund? What is its role in explaining
this difference?)