| A | B |
|---|
| Funded by the FICA | Social Security & Medicare |
| What Social Security pays for | benefits to older citizens |
| Major source of tax revenue for local gov't | property taxes |
| Discretionary spending | spending where government planners can make choices |
| tax exempt | not subject to taxes |
| Who creates the federal budget? | Congress & the White House |
| Expansionary policies | fiscal policies that encourage economic growth |
| Adam Smith, David Ricardo, Thomas Malthus | Well known economists |
| Keynesian economics | form of demand side economics that encourages gov't action |
| When revenues exceed expenditures | Budget surplus |
| Contractionary policies | Fiscal policies that reduce economic growth. |
| Fiscal Policy | the use of gov't spending & revenue collection to influence the economy |
| Automatic stabilizer | a gov't program that changes automatically depending on GDP & personal income. |
| National debt | All the money the federal government owes to bondholders |
| Balanced budget | budget in which revenues are equal to spending |
| Crowding out effect | the loss of funds for private investment due to gov't borrowing |
| Supply side economics | a school of economics that believes tax cuts can help an economy by raising supply |
| Contractionary policy | Fiscal policy that reduce economic growth. |
| Federal Reserve Sysytem | the nation's central banking system |
| What is the cost of money? | the price of the interest rate |
| Number of Federal Reserve Districts | 12 |
| Tight money policy | monetary policy that reduces the money supply |
| Why do banks hold excess reserves? | To meet customers demands |
| How the Federal Reserve Bank serves the gov't. | Selling gov't securities |
| Easy money policy | monetary policy that increases the money supply |
| Federal Open Market Committee (FOMC) | Makes key decisions about interest rates & the growth of the U.S. money supply |
| Controls week to week changes in the money supply | open market operations |
| Monetary policy | the actions the Federal Reserve takes to influence the level of real GDP & the rate of inflation in the economy |
| Relationship between interests rates & demand for money | As interests rates decrease, demand for money increases |
| Inside lag | Delay in implementing monetary policy |
