Основы экономики. Земскова Л.П. - 18 стр.

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18
firms, which finance purchases of investment goods, and government, which
finances its deficits.
7. The government may and does use taxes and spending to stabilize the
economy through fiscal policy. Fiscal policy does not stabilize GNP
perfectly because of uncertainty about the needed changes in taxes or
spending and because those changes affect GNP only slowly.
8. The deficit is not a good measure of the direction of fiscal policy, since it can
change merely because the level of income has changed. If the economy goes
into recession, the budget deficit automatically tends to increase.
9. The full-employment budget calculates what the budget surplus or deficit
would be at full employment. Changes in the full-employment budget show
the direction in which fiscal policy is shifting aggregate demand.
10. Automatic stabilizers reduce fluctuations of GNP by reducing the multiplier.
Income tax and unemployment benefits act as the most important automatic
stabilizers.
11. The national debt grows as a result of government budget deficits. The debt
is often thought of as a burden because it is the debt of everyone in the
country. But the national debt is owned mostly to ourselves, and thus the
burden mostly cancels out. The debt may, however, be a burden because it
leads to a lower stock of physical capital and, if debt becomes very large,
because interest payments can become a large part of government outlays.
12. Deficits are not necessarily bad. Particularly during recessions, any move to
get rid of them would make the situation worse. But extremely large and
persistent deficits create the possibility of a vicious circle in which large
deficits increase the national debt, increase interest payments, and thereby
lead to larger deficits.
KEY TERMS
Government outlays, or spending
Government purchases
Taxes and transfers
Consumption spending
Fiscal policy
Budget
Lump-sum taxes
Proportional taxes
Income tax
Budget surplus or deficit
Persistent deficit
National debt
Balanced budget multiplier
Contractionary (or expansionary) policy
Full(high)-employment budget
Automatic stabilizers
Burden of the debt

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