how does the government stabilize the economy

How does the government stabilize the economy?

more notes!

• the government has two different tool boxes it can use: 
• fiscal policy (action)- actions by congress to stabilize the economy. 
• fiscal policy changes in expenditures or tax revenues of the federal government:
• taxes- government can increase or decrease taxes
• spending- the government can increase or decrease spending
• fiscal policy is enacted to promote our nations economic goals: full employment, price stability, economic growth. 
• balanced budget:
• revenues equal expenditures
• budget deficit:
• revenues are less than expenditures
• budget surplus
• revenues are greater than expenditures
• government debt
• sum of all deficits - sum of all surplus's
• government can borrow money from
• individuals
• corporations
• financial institutions
• foreign governments or nations
• there are two options under fiscal policy: 
• discretionary fiscal policy (action)
• expansion- think deficit
• contractionary- think surplus
• non discretionary (no action)
• types of taxes: 
• progressive taxes- takes a larger percent of income from high income groups 
• proportional taxes- takes the same percent of income from all income groups 
• regressive taxes- takes a larger percent of income from low income groups