Essential Economic Concepts & Fiscal Policy Terms

Key Economic & Fiscal Policy Terms

Understanding the language of economics and government finance is crucial. This glossary defines essential terms related to fiscal policy, budgeting, and economic theory.

Appropriations Bill

A legislative bill that sets money aside for specific government spending.

Automatic Stabilizer

A government program designed to automatically adjust based on changes in GDP and a person's income, helping to stabilize the economy.

Balanced Budget

A financial plan where government revenue and spending are equal.

Budget Deficit

A situation in which the government spends more money than it collects in revenue.

Budget Surplus

A situation in which the government collects more money in revenue than it spends.

Classical Economics

An economic theory based on the idea that free markets can effectively regulate themselves without government intervention.

Congressional Budget Office (CBO)

A non-partisan government agency that provides economic data and analysis to Congress.

Contractionary Policies

Fiscal policies, such as lower government spending and higher taxes, implemented to reduce economic growth and curb inflation.

Council of Economic Advisers (CEA)

A group of three respected economists who advise the President on economic policy.

Crowding-out Effect

The reduction of funds available for private investment due to increased government borrowing.

Demand-side Economics

An economic theory suggesting that government spending and tax cuts stimulate an economy by increasing overall demand.

Expansionary Policies

Fiscal policies, such as higher government spending and tax cuts, designed to encourage economic growth.

Federal Budget

A comprehensive plan outlining the federal government's projected revenues and spending for the upcoming fiscal year.

Fiscal Policy

The use of government spending and revenue collection (taxation) to influence the economy.

Fiscal Year

A 12-month accounting period that can begin on any date, often used for government budgeting.

Hyperinflation

Extremely high and rapidly accelerating inflation, leading to a drastic loss of currency value.

Keynesian Economics

A form of demand-side economics that advocates for government intervention to increase or decrease aggregate demand and output, especially during economic downturns.

Multiplier Effect

The economic principle that every one dollar of government spending generates more than one dollar in overall economic activity.

National Debt

The total amount of money the federal government owes to its bondholders.

Office of Management and Budget (OMB)

A government office responsible for managing the federal budget and overseeing the performance of federal agencies.

Productive Capacity

The maximum sustainable output that an economy can produce without significant increases in inflation.

Supply-side Economics

An economic school of thought that believes tax cuts and deregulation can stimulate an economy by increasing the supply of goods and services.

Treasury Bill

A short-term government bond that is repaid within three months to one year.

Treasury Bond

A long-term government bond that can be issued for up to 30 years.

Treasury Note

A medium-term government bond that is repaid within two to ten years.