ch 31 definitions

Question 1

policy instruments

Answer 1

tools governments use to implement their policies, such as interest rates, rates of taxation, levels of government spending

Question 2

budget

Answer 2

government’s spending and revenue plans for the next year

Question 3

fiscal policy

Answer 3

decisions about government spending, taxation and levels of borrowing that affect aggregate demand in the economy

Question 4

direct taxes

Answer 4

taxes levied on the income earned by firms and individuals

Question 5

indirect taxes

Answer 5

taxes levied on spending, such as VAT

Question 6

value-added tax (VAT)

Answer 6

tax on some goods and services - businesses pay value-added tax on most goods and services they buy and if they are VAT registered, they can charge value-added tax on the goods and services they sell

Question 7

fiscal dificit

Answer 7

amount by which government spending exceeds government revenue

Question 8

fiscal surplus

Answer 8

amount by which government revenue exceeds government spending

Question 9

national debt

Answer 9

total amount of money owed by a country

Question 10

expansionary fiscal policy

Answer 10

fiscal measure designed to stimulate demand in the economy

Question 11

contractionary fiscal policy

Answer 11

fiscal measures designed to reduce demand in the economy