3.6: Fiscal Policy

Question 1

Fiscal policy

Answer 1

Involves the use of government spending and taxation to fulfils macroeconomic objectives by influencing AD

Question 2

Expenditures

Answer 2

The money spent by governments, either through government spending (G) or transfer payments

Question 3

Transfer payments

Answer 3

Payments made by the government without goods or services being received in return, such as welfare payments and donations

Question 4

Current expenditures

Answer 4

Government expenditure on goods and services within the current fiscal year

• Wage for public sector employees
• Supplies for public sector businesses
• Interest payments for national debt
• The provision of subsidies and grants

Question 5

Capital Expenditure

Answer 5

Government expenditure on long-term projects

• Infrastructure