Fiscal Policy 1

Question 1

What is The Budget?

Answer 1

Annual Statement of projected outlays and receipts
Forecast of taxes and spending of next year

Question 2

Fiscal Policy

Answer 2

Use of government spending and taxation to influence the economy

Question 3

Main Budget outlays

Answer 3

Includes all expenditure
- Expenditure on goods and services
- Transfer payments (pensions)
- Debt interest payments

Question 4

Main budget receipts

Answer 4

Primarily from taxes and assets
- Taxes on income, wealth, expenditure
- National insurance
- Income from Assets and royalties

Question 5

The Two budget balences

Answer 5

1. BB = Receipts - Outlays
2. BB = T - G (T =net taxes, G = Expenditure on g/s)

Question 6

What do governments do when they run a deficit

Answer 6

Borrow money by issuing government bonds (debt issuance)

Question 7

Options when gov is in debt

Answer 7

• Higher taxes
• Lower spending

Question 8

What is the Laffer curve?

Answer 8

Shows the relationship between tax rates and the amount of tax revenue