2.6.2 - Demand side policies

Question 1

Fiscal policy

Answer 1

Government spending of taxation and borrowing

Question 2

Aspects of government spending

Answer 2

Financing spending, distribution of wealth, welfare state, managing economic cycle, long run competitiveness, tackling market failure

Question 3

Justifications for government spending

Answer 3

Provide public and merit goods, infrastructure, welfare benefits

Question 4

Taxation

Answer 4

Direct taxes = taxes on income
Indirect taxes = VAT and other taxes on goods and services

Question 5

Budget surplus

Answer 5

Spending is less than tax revenues

Question 6

Budget deficit

Answer 6

Spending is greater than tax revenues