Chapter 11: Fiscal Policy, Surpluses and Debt

Changes in government spending and taxation to shift the aggregate demand curve to the right or to the left

• The DELIBERATE change of government expenditures and taxes to promote:
• full employment
• price stability
• economic growth

Increase in government spending & decrease in taxes to increase aggregate demand (shift aggregate demand curve to the right)

Decrease in government spending & increase in taxes to decrease aggregate demand (shift aggregae demand curve to the left)

Amount by which government expenditures exceed revenues

Amount by which revenues exceed expenditures

• Results from net taxes
• Lessens, but does not fully correct, undesired changes in GDP

• Measures the federal budget defecit or surplus that would occur if the government were to operate at full employment
• Reveals whether fiscal policy is expansionary, neural or contractionary
• Expansionary when CAB is positive
• Contractionary when CAB is negative

Total accumulation of government's defecits (minus surpluses) over time