Fiscal Policy Flashcards
What is fiscal policy?
It is a process used by the Federal Gov to control income + expenditure to promote economic growth, stabilize growth, or slow it down.
What is the main tool used to manage fiscal policy?
The budget.
Components of the budget are:
Changing taxation rates, (raise or lower)
Changing the amount of money spent on major projects/ gov services
Budget is delivered when? and what does it address?
Delivered in May
Addresses spending + taxation intentions for the financial year
What are the three budget outcomes?
Balanced (spending = taxation)
Deficit (Spending > taxation)
Surplus (Spending < taxation)
What are the three budget stances?
Neutral (no change in budge outcome since the previous year)
Expansionary (a bigger deficit or smaller surplus than the previous year)
Contractionary (a smaller deficit of larger surplus than the previous year)
Balanced Budget meaning?
Taxation = spending
The Gov spends the taxation they collect, but don’t spend any more or less.
Deficit Budget meaning?
Spending > taxation
The Gov spends more money than they collect from taxation.
(they probably collect more taxes or smth to make up for it)
Surplus Budget meaning?
Spending < taxation
The Gove spends less money than they collect from taxation.
(they can slowly pay back the debt in tax or maybe save it for future?)
Neutral Budget Stance meaning?
No change in budget out come from the last year.
Expansionary Budget Stance meaning?`
There is a bigger deficit or smaller surplus than last year.
(AKA the Gov spent more money)
Contractionary Budget Stance meaning?
There is a smaller deficit or larger surplus than the last year.
(AKA the Gov spend less money)
What is the Fiscal policy affected by?
Inflation
Demand
Supply
Employment
Economic growth
(AKA default answers)
