Cont'd. Chapter 11. Fiscal Policy and the Federal Budget: Pre-Class & In-Class Activities Packet Name/I.D. Number: Section: Date: Part 2. Matching: Match the Key terms in Column "A" with the definitions in Column "B" by writing the block (upper) case letter of your choice under column "A" and match the definitions in column "B" with the meanings or examples or real world applications in column "C" by writing the small (lower) case letter of your choice under column "B". Column "A" Column "B" Column "C" 11. Expansionary K. A decrease in one or more components of private k. A type of crowding out that occurs when an spending that completely offsets the increase in increase in government spending is partly Fiscal Policy government spending. offset by a fall in spending by businesses and 12. Contractionary L. Increases in government expenditures and/or decreases households. in taxes to achieve particular economic goals. The economic units in a country that supports Fiscal Policy M. In terms of income taxes, the total amount of taxable government spending by paying taxes. income. Tax revenue = Tax base x (ave.) Tax rate. m. A type of fiscal policy that is built-into the 13. Discretionary N. Changes in government expenditures and/or taxes that system so that active Congress is not required to adopt laws. Fiscal Policy occur automatically without (additional) congressional n. A type of crowding out that occurs when an action 14. Automatic increase in government spending is O. Deliberate changes of government expenditures and/or neutralized by a fall in expenditures by Fiscal Policy taxes to achieve economic goals. businesses and household. P. The decrease in private expenditures that occurs as a o. The additional tax paid on additional income 15. Crowding Out consequence of increased government spending or the earned. financing needs of a budget deficit. p. A simple and unique curve that shows initially 16. Complete Q. The decrease in one or more components of private the direct and at a later stage the inverse Crowding Out spending that only partially offsets the increase in relationship between tax rate and tax government spending. revenue. 17. Incomplete R. The change in a person's tax payment divided by the 9- A type of fiscal policy that involves a fall in change in taxable income: ATax payment + ATaxable government spending and/or a rise in taxes. Crowding Out income. r. A situation whereby government borrowing suffocating the capital market & causing 18. Marginal(Income) S. The curve, named after Arthur Laffer, that shows the interest rate to rise thereby reducing private relationship between tax rates and tax revenues. According to the Laffer curve, as tax rates rise from zero, tax sector spending by businesses and Tax Rate households. revenues rise, reach a maximum at some point, and then 19. Laffer Curve S. A type of fiscal policy that involves a rise in fall with further increases in tax rates. government spending and/or a fall in taxes. 20. Tax Base T. Decreases in government expenditures and/or increases t. A type of fiscal policy adopted by an active in taxes to achieve economic goals. congress as opposed to the built in one