Fiscal Policy

Question 1

Describe Fiscal Policy

Answer 1

A demand management tool that utilizes govt expenditure and taxation revenue. It is used to manage the economy in order to achieve its macro-economic objectives (employment, inflation) It can be broken down into expansionary and contractionary fiscal policy.

Question 2

What can fiscal policy be broken into

Answer 2

It can be broken down into expansionary and contractionary fiscal policy.

Question 3

What is expansionary fiscal policy

Answer 3

A demand govt took which govts choose to use during times of recession (when there is a downturn in economic activity or a decline in employment & output)

Question 4

Expansionary fiscal policy involves…

Answer 4

the increasing of govt expenditure and the lowering of taxation.
This leads to an upward shift in the aggregate expenditure/demand curve.

Question 5

What does the govt incur when implementing expansionary fiscal policy

Answer 5

A budget deficit or fiscal deficit

Question 6

Describe contractionary fiscal policy

Answer 6

A demand management took used by the govt to cover aggregate demand, it is used in times when an inflationary gap exists or when too much money is chasing too few goods.h

Question 7

What does c.f.p involve

Answer 7

The lowering of govt expenditure and increasing taxation. The aggregate demand curve shifts downwards

Question 8

What does the govt incur when implementing c.f.p

Answer 8

fiscal/budget surplus

Question 9

Economic recession -

Answer 9

Expansionary fiscal policy

Question 10

Cyclical unemployment

Answer 10

Expansionary fiscal policy

Question 11

Demand pull inflation

Answer 11

Contractionary fiscal policy

Question 12

Current account deficit (imports>exports)

Answer 12

Contractionary fiscal policy

Question 13

Current account surplus (exports>imports)

Answer 13

Expansionary fiscal policy