Chapter Summary

Key Points

  1. Describe the federal budget, the process that creates it, and a challenge that it faces.

    • The federal budget is an annual statement of the outlays, tax revenues, and budget surplus or deficit of the government of the United States.

    • Fiscal policy is the use of the federal budget to finance the federal government and to influence macroeconomic performance.

    • An ever rising national debt and large fiscal imbalance is a major fiscal policy challenge.

  2. Explain how fiscal stimulus is used to fight a recession.

    • Fiscal policy can be either discretionary or automatic.

    • Changes in government expenditure and changes in taxes have multiplier effects on aggregate demand and can be used to try to keep real GDP at potential GDP. ...

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