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Recessionary Gap
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A situation wherein the real GDP is lower than the potential GDP at the full employment level
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Inflationary Gap
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The amount by which the actual gross domestic product exceeds potential full-employment GDP
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The Great Moderation
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Refers to a period of economic stability starting the mid-1980s characterised by low inflation, positive economic growth, and the belief that the boom and bust cycle had been overcome
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Fiscal policy
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The way a government adjusts its spending levels and tax rates to monitor and influence a nation's economy
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Expansionary fiscal policy
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Stimulates the economy during or in anticipation of a business-cycle contraction
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Contractionary fiscal policy
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Enacted by a government to reduce the money supply and ultimately the spending in a country
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Deficit spending
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The government spending more money than it collects in tax revenue
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Crowding out
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Where increased public sector spending replaces, or drives down, private sector spending
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Stimulus package
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A package of tax rebates and incentives used by the governments of various countries to stimulate the economy
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Austerity
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Raising taxes and cutting government spending to reduce debt
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Multiplier effect
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Refers to the increase in final income arising from any new injection of spending; the initial increase in government spending of 100$ might turn out to be 175$ worth of actual spending in the economy
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Budget Deficit
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The amount by which a government's spending exceeds its income over a particular period of time
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