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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- Fiscal policy
- Government's use of spending and taxation to influence economic activity and growth.
- Budget deficit
- Annual government spending exceeds government revenue in a given year.
- Budget surplus
- Annual government revenue exceeds government spending in a given year.
- Balanced budget
- Government spending equals government revenue in a given year.
- National debt
- Cumulative total of all federal deficits and surpluses from past years.
- Debt-to-GDP ratio
- National debt as a percentage of gross domestic product, a measure of debt sustainability.
- Discretionary spending
- Government spending on programs that require annual congressional approval, such as defense and education.
- Mandatory spending
- Government spending on programs with eligibility rules that automatically obligate funds, such as Social Security and Medicare.
- Transfer payments
- Government payments to individuals or households that do not represent payment for goods or services, such as social security benefits.
- Government revenue
- Income the government collects, primarily through taxation and user fees.
- Expansionary fiscal policy
- Government increases spending or cuts taxes to stimulate economic growth and reduce unemployment.
- Contractionary fiscal policy
- Government decreases spending or raises taxes to reduce inflation and slow down an overheating economy.
- Automatic stabilizers
- Fiscal mechanisms that dampen economic fluctuations without requiring deliberate policy changes, such as progressive income taxes and unemployment benefits.
- Multiplier effect
- Initial increase in government spending leads to a greater total increase in economic output due to increased consumer spending.
- Crowding out
- Government borrowing to finance deficit spending drives up interest rates, reducing private investment.