Fiscal Policies Flashcards
What is fiscal policy
The use by the government of government spending and taxation to try to achieve the government policy objectives.
What are some fiscal techniques/instruments that government can use
- Taxation
- Public Spending
- Government expenditure
- Central government borrowing
What are the 4 government policies
- Full employment
- Price stability
- A high, sustainable rate of economic growth
- Keeping the BoP in equilibrium
What are the Macro objectives of the fiscal policy
- To manage output gaps
- To increase productive capacity
What is a balanced budget
It is what happens when taxes and government expenditures are equal
What is a budget defecit
Taxes < Expenditure
What is a budget surplus
Taxes > Expenditure
Describe the expansionary fiscal policy and when you would use it
changes to taxes, expenditures and borrowing that aim to INCREASE the level of economic activity. Used when the NEGATIVE output gaps are becoming quite large and problematic
Describe the contractionary fiscal policy and when you would use it
changes to taxes, expenditures and borrowing that aim to REDUCE the level of economic activity. Used when the POSITIVE output gaps are becoming quite large and problematic
What does demand-side fiscal policies aim to do
they aim to try and influence the aggregate demand of an economy
What does supply-side fiscal policies aim to do
they aim to try and influence the productive capacity of an economy
What are some examples of demand-side fiscal policies
- Government spending
- Tax cuts
- transfer payments/benefits
