Fiscal policy

Question 1

Fiscal policy

Answer 1

the use of taxation and gov spending to control the macroeconomic performance of the economy

Question 2

contractionary fiscal policy

Answer 2

increases taxes and lowers gov spending to reduce AD, used in boom phase

Question 3

expansionary fiscal policy

Answer 3

lowers taxes and increases gov spending to boost AD, used in a recession

Question 4

purposes of taxation

Answer 4

-finance gov spending/public services
-create more equal dist of Y and W
-correct market failures
-control state of the economy

Question 5

current spending

Answer 5

spending on providing & running public services eg. NHS salaries, road maintenance

Question 6

capital spending

Answer 6

spending on new public infrastructure eg. construction of new motorways and bridges

Question 7

two types of fiscal policy

Answer 7

discretionary and automatic

Question 8

discretionary policy

Answer 8

policies that are implemented through one-off policy changes

Question 9

automatic fiscal policy

Answer 9

(aka automatic stabilisers) fiscal policy simply by being in existence can help control fluctuations in the economic cycle

Question 10

cyclical budget

Answer 10

budget that is dependant on the state of the economy (deficit in a recession, surplus in a boom)

Question 11

structural budget

Answer 11

an independant budget- not reliant on the state of the economy