3.5 - fiscal policy Flashcards
government spending
total amount of money spent by the government in a given period of time
fiscal policy is used to achieve: ….
economic growth, low unemployment, price stability, a balance in the balance of payments
direct tax
tax on income or wealth
government revenue
the source of finance for gov spending
direct tax in uk:
income tax, NICs, corporation tax
indirect tax
tax on spending, often defined as a tax on goods and services
indirect taxes in UK:
VAT, excise duties, insurance premium tax, air passenger duty, gambling duties
balanced government budget
when gov’s revenue is equal to its expenditure/saving
budget deficit
when gov expenditure > revenue
budget surplus
gov’s revenue > expenditure
fiscal policy
a policy that uses taxation and gov spending to affect the economy as a whole
fiscal policy can be used in order to achieve:
economic growth, price stability, low unemployment, a balance of payments
how can a budget deficit be used to achieve economic objectives
an increase in gov spending, a reduction in taxes
how can a budget surplus be used to achieve economic objectives
a decrease in gov spending, an increase in taxes
income and wealth redistribution
government action, using mainly taxation and benefits, to reduce inequalities of income and wealth
