Chapter 17 Flashcards
a change in govt spending or taxation with the purpose of stimulating the economy
fiscal policy
What are other things that fiscal policy helps to achieve?
-is another policy tool governments can use to regulate the economy
-is the use of govt spending and tax policy to influence the path of the economy over time
-the most effective fiscal policy is made at the federal level
-fiscal policy focuses strictly on government policies
What is Budget Deficit
when the govt spends more money than they receive (G-T)
What is Budget Surplus
when the govt receives more money in taxes than it spends (T-G)
What is a Balanced Budget
when govt spending and taxes are equal
refers to what happens with the federal govt budget each year
Government Deficit/Surplus
is accumulated over time and is the sum of all past deficits and surpluses
Govt Debt
a tax that is a flat percentage of income earned regardless of level of income
proportional tax
a tax in which people with higher incomes pay a smaller share of their income tax
regressive tax
higher incomes are taxed at higher percentages and lower incomes are taxed with lower percentages
progressive tax
The categories of Federal Spending include
National Defense, Social Security, Health Programs and Interest Payments
a tax based on the income receives by individuals
Individual Income Tax
a tax based on the pay received from employers
Payroll Tax
a tax imposed on corporate profits
Corporate Income Tax
a tax on a specific good, like gasoline, tobacco and alcohol+ a tax proportion of purchases
Excise Tax and GST
a tax on people who pass assets to the next generation (either after death or during form of gifts), is based on how the tax rate changes at higher incomes
Estate and GIFT tax
Marginal Tax
is the tax rate an individual would pay on one additional dollar of income, or the tax percentage on the last dollar earned (ranges from 15-33%)
a Canadian tax system is a _____________ tax system.
progressive
the value of the tax brackets/ the thresholds of the marginal tax rates change every year due to ___________
inflation
Taxes raised by canadian provinces are..
-property taxes
-revenue passed along from the federal govt
-personal and corporate income taxes
-a variety fees and charges
an EXPANSIONARY Fiscal Policy ____________ the level of aggregate demand, either through _________ in govt spending or _____ in taxes
increases, increase, cuts
a CONTRACTIONARY Fiscal Policy _____________ the level of aggregate demand, either through ____ in govt spending or taxes
decreases, cuts
a shift in aggregate demand caused by expansionary fiscal policy can…
move economy to new equilibrium, any inflationary increase should be small
a contractionary fiscal policy can..
shift aggregate demand down, reduce inflation
refers to a federal transfer payment program that was first introduced in 1957 and is designed to reduce the differences in revenue-generating capacity across Canada’s 10 provinces. By compensating poorer provinces for their relatively weak tax bases or resource endowments,
Equalization
helps to ensure that Canadians residing in provinces have access to a reasonably similar level of ___________ ____________ ___________ at reasonably similar levels of taxation. Another federal transfer program, __________ __________ ________ serves a similar purpose for territorial governments.
provincial govt services, territorial formula financing
Discretionary/ Intentional Fiscal Policy
happens when the govt passes a new law that changes overall tax or spending levels with the intent of influencing the level of overall economic activity
Automatic Stabilizers
tax and spending rules that have the effect of slowing down the rate of decrease in aggregate demand when the economy slows down and restrains aggregate demand when the economy speeds up ex.unemployment and food stamps
what does the government do to maintain fiscal stability
the government issues bonds and securities to finance public expenditure and pay off debts
the federal govt manages its national debt through
responsible borrowing practices
a situation when govt borrowing and spending results in an increase in interest rates, which reduces business investment and consumption
The crowding effect
Recognition Lag
the time it takes to determine that a recession has occured
Legislative Lag
the time it takes to get a fiscal policy bill passed
Implementation Lag
the time it takes for the funds relating to fiscal policy to be dispersed to the appropriate agencies to implement the programs
The _____ -Balanced Budget Argument would be that low deficit means low debt which lowers interest payment
Pro
The _________-Balanced Budget Argument is that running large budget deficits when used for long term investments in human capital and physical infrastructure could build the country’s long term productivity
Opposed
Examples of expansionary fiscal policies during economic downturn include;
increased got spending on infrastructure, tax cuts, and direct transfers to households
the total federal spending has ranged from
18-22% of GDP
the largest budget deficit of canadian govt occurred during the
great recession
a fiscal surplus
is govt budget that can lead to reduced public debt, reduced credit ratings and increased funds for future investments
If a country’s GDP increases, but its debt also increases during that year, then the country’s debt to GDP ratio will change how?
increase or decrease
If government tax policy requires Jane to pay $25,000 in taxes on annual income of $200,000 and Mary to pay $10,000 in tax on annual income of $100,000, then the tax policy is how?
progressive
if the government of Saskatchewan collects $75 billion in tax revenues and spends $74.8 billion, what will be the result?
contractionary fiscal policy
T or F: An increase in taxes in a contractionary fiscal policy.
true
What tax and spending rules can affect aggregate demand without any changes in legislation?
automatic stabilizers
