13. Fiscal Policy And Supply-side Policies Flashcards

1
Q

Fiscal policy

A

The use by the government spending and taxation to try to achieve the government’s policy objectives

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2
Q

Balanced budget

A

Achieved when government spending equals government revenue (G=T)

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3
Q

Budget deficit

A

Occurs when government spending exceeds government revenue (G>T) . This represents a net injection of demand into the circular flow of income and hence a budget deficit is expansionary.

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4
Q

Budget surplus

A

Occurs when government spending is less than government revenue (G<T). This represents a net withdrawal from the circular flow of income and hence a budget surplus is contractionary

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5
Q

Way of financing a budget deficit

A

Public-sector borrowing

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6
Q

Ways of eliminating a budget deficit

A

Raising taxation, cutting public spending

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7
Q

Demand-side fiscal policy

A

Used to increase or decrease the level of aggregate demand (and to shift the AD curve right or left) through changes in government spending, taxation and the budget balance.

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8
Q

Deficit financing

A

Deliberately running a budget deficit and then borrowing to finance the deficit

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9
Q

Goal of running a budget deficit on purpose

A

To achieve full employment and to stabalise the economic cycle, without at the same time creating excessive inflationary pressures.

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