3.1 - fiscal policy Flashcards
Balanced gov budget
Gov spending = tax revenue
Budget surplus
Gov spending < tax rev
Budget deficit
Gov spending > tax rev
How much the gov has borrowed
Cyclical budget position
Size of fiscal deficit is influence by state of the economy
Structural budget position
Not related to the state of the economy
Includes an ageing population
Public debt
Total debt the gov owes
Direct taxation
Tax paid by an individual directly to the gov
E.G Income tax
Indirect taxation
Charged as a % of the price of a G+S
E.G VAT / customs rev
Progressive taxation
Higher income = higher % taxation
Used to reduce inequality of wealth
Regressive taxation
Takes a higher % of income from people with less income
E.G VAT
Proportional taxation
Takes the same % of income regardless of how much earned
Discretionary fiscal policy
When the gov takes action to influence AD
E.G increasing interest rates / lowering tax
Contractionary fiscal policy
Done by decreasing gov spending / incr taxes
Reduces budget deficit - leads to higher inflation
Expansionary fiscal policy
Done by increasing gov spending / reducing taxes
Done for SR economic growth
Leads to budget deficit
