Flashcards: Understanding Fiscal Policy and Public Debt — 16 cards

Market mechanisms — definition?

Economic processes operating through individual choices.

State in liberal theories — role?

Limited to police, justice, defense functions.

Liberal view on intervention — stance?

Illegitimate and disruptive to markets.

Keynesian state role — objective?

Correct market failures and promote welfare.

Welfare state — functions?

Regulates activity, social protection, income redistribution.

Economic policy — goal?

Stabilize economy and foster growth.

Cyclical policy — focus?

Short-term balance of growth, employment, prices.

Structural policy — focus?

Long-term growth, equity, sustainability.

Fiscal policy — main tool?

Government budget decisions on spending and taxes.

Fiscal stimulus — mechanism?

Increases demand via spending, tax cuts, transfers.

Expenditure multiplier — effect?

Spending generates additional income and demand.

Fiscal policy limits — main issues?

Inflation, crowding-out, deficit financing.

Public debt — what?

Total accumulated government borrowing.

Debt dynamics — risk?

Unsustainable debt leads to instability.

EU fiscal rules — example?

Stability and Growth Pact, deficit below 3%.

Escape clause — purpose?

Temporary derogation during severe downturns.