Chapter 9 Flashcards
Fiscal policy
Use of government spending p, taxation and government’s budgetary position to achieve the government’s policy objectives
Taxation
Compulsory levies charged by central and local government to raise revenue, primarily to finance government spending
Progressive tax
When the proportion of income paid in tax rises as income increases
Regressive tax
When the proportion of income paid in tax falls as income increases
Proportional tax
When the proportion of income paid in tax stays the same as income increases
Principals of taxation
Criteria for juding whether a tax is a good tax or a bad tax
Balancing the budget
Setting government spending equal to government revenue G=T
Gin and Tonic
Budget deficit
Amount by which government spending exceeds government revenue in a particular time period
G>T
Budget surplus
Amount by which government spending is less than government revenue in a particular time period G
Cyclical budget deficit
Part of the budget deficit which rises in the downswing of the economic cycle and falls in the upswing of the cycle
Structural budget deficit
Part fo the budget deficit which is not affected by the economic cycle but results from structural change in the economy affecting the government’s finances
Supply-side policies
Government economic policies which aim to make markets more competitive and efficient, increase production potential, and shift the LRAS curve to the right
Office for Budget Responsibility
Advisory public body that provides independent economic forecasts and analysis if the public finances as background to the preparation of the UK budget
National debt
Amount of accumulated debt, resulting from past government borrowing, that is owed by the UK government both to the UK residents and financial institutions
Supply-side improvements
Reforms undertaken by the private sector to increase productivity so as to reduce costs and to become more efficient snd competitive
