Fiscal policy is government policy on spending and taxes.

Stabilization policy is government action to keep output close to potential output.

The budget deficit is the excess of government spending over government receipts.

The national debt is the stock of outstanding government debt.

Net taxes are taxes minus transfers.

The balanced budget multiplier says that a rise in government spending plus an equal rise in taxes leads to higher output.

A budget is the spending and revenue plans of an individual, a company, or a government.

Higher government spending on goods and services increases equilibrium output. With a given tax rate, tax revenue rises but the budget deficit increases (or the budget surplus falls).

For given government spending G, a higher tax rate reduces both equilibrium output and the budget deficit.

The fiscal stance shows the effect of fiscal policy on demand and output.

The structural budget shows what the budget would be if output is at potential output.

The inflation-adjusted budget uses real, not nominal, interest rates to calculate government spending on debt interest.

Automatic stabilizers reduce the multiplier and thus output response to demand shocks.

Discretionary fiscal policy is decisions about tax rates and levels of government spending.

The government’s debts are called the national debt.

The trade balance is the value of net exports. If these are positive, the economy has a trade surplus. If imports exceed exports, the economy has a trade deficit.

The marginal propensity to import (MPZ) is the fraction of each extra pound of national income that domestic residents wish to spend on extra imports.