5.2 Fiscal policy Flashcards
Define the term “fiscal policy”
The use of taxation and government spending to influence aggregate demand.
Define the term “government budget”
An annual statement in which the gov. outlines plans for its spending and tax revenue.
Define the term “Budget surplus”
Government revenue exceeding government expenditure.
Define the term “Budget deficit”
Government expenditure exceeding government revenue.
Define the term “Balanced budget”
Government revenue equaling government expenditure.
Define the term “Automatic stabilizers”
Changes in government spending and taxation that occur to reduce fluctuations in aggregate demand without any alteration in government policy.
Define the term “Cyclical budget deficit”
A budget deficit caused by a decline in economic activity.
Define the term “Structural budget deficit”
A budget deficit caused by an imbalance between government spending and taxation.
Define the term “Tax base”
The coverage of what is taxed.
Define the term “National debt”
The total amount of government debt.
Define the term “Specific taxes”
Taxed that are charged as a set amount per unit.
Define the term “Sin taxes”
Taxes on products considered harmful to consumers.
Define the term “Direct taxes”
Taxes on income and wealth.
Define the term “Tax avoidance”
The legal bending of the rules of the tax system to pay less tax.
Define the term “Tax evasion”
The illegal non-payment or underpayment of a tax.
Define the term “Regressive tax”
A tax which takes a larger percentage of the income or wealth of those on low incomes.
Define the term “Proportional tax”
A tax which takes the same percentage of the income or wealth of all income groups.
Define the term “Marginal rate of taxation (mrt)”
The proportion of extra income taken in tax.
Define the term “Average rate of taxation (art)”
The proportion of income that is taxed.
Define the term “Current government spending”
Government spending on providing goods and services.
Define the term “Capital government spending”
Government spending on investments.
Define the term “Exhaustive government spending”
Government spending which makes use of resources.
Define the term “Non-exhaustive government spending”
Government spending which allows others to decide how resources are used.
Define the term “Expansionary fiscal policy”
Increases in government spending and cuts in taxes designed to increase aggregate demand.
Define the term “Contractionary fiscal policy”
Decreases in government spending and increases in taxes designed to reduce the growth of aggregate demand.
Define the term “Discretionary fiscal policy”
Deliberate changes in government spending and taxation.
