Fiscal Policy Flashcards
What is fiscal policy?
The use of government spending and taxation to influence the economy
What is expansionary fiscal policy?
Policies that increase government spending or reduce taxes to boost economic growth
What is contractionary fiscal policy?
Policies that reduce government spending or increase taxes to slow down economic activity
What are the sources of government revenue?
Taxes
Borrowing
Other incomes (fines, fees, dividends)
What are the types of government expenditure?
Current spending
Capital Spending
Transfer Payments
What is current spending?
Current expenditures is the spending required for the functioning of government services and operations
What is capital spending?
Capital expenditures are often referred to as public investment, involving spending on assets that provide long-term benefits and contribute to economic development
What are transfer payments?
Transfer payments are non-exchange transactions where the government redistributes income from one group to another without providing goods and services in return
What are direct taxes?
Levied directly on individual or corporation
Paid straight to the government
What are indirect taxes?
Levied on goods and services
Collected by intermediaries
What is expansionary fiscal policy?
Stimulates economic growth during a recession
Involves increasing government spending and lowering taxes
What is contractionary fiscal policy?
Reduces inflation and slow down an overheating economy
Involves decreasing government spending and raising taxes
