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li:before{content:"- "}.lst-kix_ls9w5n666dfj-7 > li:before{content:"- "}.lst-kix_hq9x1ebb3kr6-0 > li:before{content:"● "}.lst-kix_g5gqv1oudf89-7 > li:before{content:"- "}.lst-kix_kivaj3jhlmkj-7 > li:before{content:"- "}.lst-kix_g5gqv1oudf89-6 > li:before{content:"- "}.lst-kix_g5gqv1oudf89-8 > li:before{content:"- "}.lst-kix_ls9w5n666dfj-8 > li:before{content:"- "}.lst-kix_kivaj3jhlmkj-5 > li:before{content:"- "}.lst-kix_kivaj3jhlmkj-6 > li:before{content:"- "}.lst-kix_hq9x1ebb3kr6-5 > li:before{content:"■ "}.lst-kix_hq9x1ebb3kr6-4 > li:before{content:"○ "}.lst-kix_hq9x1ebb3kr6-8 > li:before{content:"■ "}.lst-kix_hq9x1ebb3kr6-1 > li:before{content:"○ "}.lst-kix_hq9x1ebb3kr6-3 > li:before{content:"● "}.lst-kix_hq9x1ebb3kr6-2 > li:before{content:"■ "}.lst-kix_g5gqv1oudf89-3 > li:before{content:"- "}ul.lst-kix_h84dyaui74yd-8{list-style-type:none}ul.lst-kix_h84dyaui74yd-7{list-style-type:none}.lst-kix_g5gqv1oudf89-2 > li:before{content:"- 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Chapter 12 Deficits and Debt

• Fiscal policy: the use of government taxes and spending to alter macro economic outcomes.
• Deficit spending: the use of borrowed funds to finance government expenditures that exceed tax revenues.
• Budget Deficit: the amount by which government spending exceeds government revenue in a given time period.
• Budget deficit = government spending - tax revenues
• Budget surplus = an excess of government revenues over government expenditures in a given time period.
• Fiscal stimulus: tax cuts or spending hikes intended to increase(shift) aggregate demand.
• Fiscal restraint: tax hikes or spending cuts intended to reduce(shift) aggregate demand.
• Fiscal year(FY): the 12 - month period used for accounting purposes; begins october 1 for the federal government.
• Discretionary fiscal spending: those elements of federal budget not determined by past legislative or executive commitment.
• Income transfers:payments to individuals for which no current goods or services are exchanged, such as social security, welfare, and unemployment benefits and income taxes.
• Cyclical deficit: that portion of the budget deficit attributable to unemployment or inflation.

• The cyclical deficit widens when GDP growth slows or inflation increases.
• The cyclical deficit shrinks when GDP growth accelerates or inflation increases.

• Structural deficits.
• Total budget balance = cyclical balance + structural balance.
• Structural deficit: federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy.

• Fiscal stimulus is measured by an increase in the structural deficit.
• Fiscal restraint is gauged by a decrease in the structural deficit.

• Four potential uses for a budget surplus:

• Spend it on goods and services.
• Cut taxes.
• Increase income transfers.
• Pay off old debt(“save it”)

• Crowding in: an increase in private sector borrowing( and spending) caused by decreases government borrowing.
• National debt: accumulated debt of the federal government.
• Treasury bonds: promissory notes(lou`s) issued by the U.S. treasury.
• Liability: an obligation to make future payment; debt.
• Asset: anything having exchange value in the marketplace; wealth.
• Internal debt: U.S. government debt held by U.S. households and institutions.
• External debt: U.S. government debt held by foreign households and institutions.
• Refinancing: the issuance of new debt in payment of debt issued earlier.
• Debt service: the interest required to be paid each year on outstanding debt.
• Optimal mix of output: the most desirable combination of output attainable with existing resources, technology, and social values.
• Deficit ceiling: an explicit, legislative limitation on the size of the budget deficit.
• Debt ceiling: an explicit, ligestated limit on the amount of outstanding national debt.

Don't forget about the age old question of What is xiuhpohualli?

Chapter 12 study questions.We also discuss several other topics like What is the relationship between strong and weak notes?

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Chapter 13 money and banks.

• Barter: the direct exchange of one good for another, without the use of money.
• Anything that serves all the following purposes can be though of as money:

• Medium of exchange: is accepted as payment for goods and services(and debt)
• Store of value: can be held for future purchases.
• Standard of value: serves as a yardstick for measuring the prices of goods and services.

• Money: anything generally accepted as a medium of exchange.
• Money supply(M1): currency held by the public, plus balances in transactions accounts, cash and checking accounts.
• Money supply(M1) includes:

• Currency in circulation.
• Transactions account balances,
• Travelers checks.

References: