4: Fiscal Policy

Question 1

Impact

Answer 1

• Economic Activity
• Resources Use
• Income Distribution
• To Expand Economy Budget Deficit has to be Financed

Question 2

Method of Financing a Deficit

Answer 2

• Borrow From the RBA
• Sell Asset
• Borrow from Private Sector
• Borrow from Overseas
• Print Money

Question 3

Using Budget Surplus

Answer 3

• Deposit into RBA
• Pay off Debt (to Private Sectors)
• Pay off Debt (to Foreigners)
• Invest into Government Owned Business

Question 4

Strength of FP

Answer 4

• Selective
• Direct
• Automatic Stabaliser
• Controls Spending Tap

Question 5

Weakness of FP

Answer 5

• Time Lags
• Inflexibility
• Political Problem
• Crowding Out
• Unforeseen Circumstances