Fiscal Policy

Question 1

Fiscal policy

Answer 1

Decisions about government spending, taxation and levels of borrowing that affect aggregate demand in the economy

Question 2

Policy instruments

Answer 2

Tools governments use to implement their policies, such as interest rates, rates of taxation, levels of government spending

Question 3

Environmental tax

Answer 3

Tax designed to protect the environment

Question 4

Indirect tax

Answer 4

Duties, sales tax, council tax

Question 5

National dept

Answer 5

Total amount of money owed by a country

Question 6

Expansionary fiscal policy

Answer 6

Fiscal measures designed to stimulate demand in the economy

Question 7

Contractionary fiscal policy

Answer 7

Fiscal measures designed to reduce demand in the economy

Question 8

Fiscal deficit

Answer 8

When a government’s expenditure exceeds its revenue

Question 9

Fiscal surplus

Answer 9

When a government’s revenue exceeds its expenditure

Question 10

Fiscal policy on macro objectives

Answer 10

Economic growth - can help stimulate (increase gov expenditure will increase aggregate demand)
Unemployment - can help reduce (increase gov expenditure and tax cuts to stimulate demand)
CAD - can help balance (if there is a large deficit, contractionary fiscal policy will reduce aggregate demand)
Environment - encourages environment friendly activities using subsidies