Government spending, taxation, and budget deficit concepts in macroeconomic fiscal policy. Front: the term or concept. Back: a plain-language definition.
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- Budget deficit
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Annual government spending exceeds government revenue in a given year.- Budget surplus
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Annual government revenue exceeds government spending in a given year.- Balanced budget
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Government spending equals government revenue in a given year.- National debt
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Cumulative total of all federal deficits and surpluses from past years.- Debt-to-GDP ratio
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National debt as a percentage of gross domestic product, a measure of debt sustainability.- Discretionary spending
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Government spending on programs that require annual congressional approval, such as defense and education.- Mandatory spending
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Government spending on programs with eligibility rules that automatically obligate funds, such as Social Security and Medicare.- Transfer payments
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Government payments to individuals or households that do not represent payment for goods or services, such as social security benefits.- Government revenue
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Income the government collects, primarily through taxation and user fees.- Expansionary fiscal policy
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Government increases spending or cuts taxes to stimulate economic growth and reduce unemployment.- Contractionary fiscal policy
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Government decreases spending or raises taxes to reduce inflation and slow down an overheating economy.- Automatic stabilizers
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Fiscal mechanisms that dampen economic fluctuations without requiring deliberate policy changes, such as progressive income taxes and unemployment benefits.- Progressive taxation
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Tax system where tax rate increases as income increases, so higher earners pay a larger percentage of their income in taxes.- Regressive taxation
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Tax system where tax rate decreases as income increases, placing a heavier burden on lower-income earners.- Proportional taxation
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Tax system where all individuals pay the same percentage of income in taxes regardless of income level.
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