Fiscal Policy Flashcards
What is a fiscal policy?
use of taxation, government spending and government
borrowing to influence the economy.
What is a demand side fiscal policy?
fiscal policies that aim to manipulate aggregate demand (AD) to achieve the macroeconomic objectives
What is a supply-side fiscal policy?
fiscal policies that aim to improve the supply-side of the economy
What is public spending?
spending by the government to influence AD
What is current spending?
government consumption (G) = spending on the say- today costs of running public services e.g. wages of teachers, energy bills for hospitals; directly affects AD
What is capital spending?
government investment in the economy’s infrastructure e.g. building hospitals & housing, new roads/railways
What is a direct tax?
A tax on income/wealth e.g. income tax, employee NICs, corporation
tax, capital gains tax
What is an indirect tax?
a tax on spending e.g. VAT, excise duties
What is a progressive tax?
a tax that takes a higher proportion of income from those on
higher incomes
What is a proportional tax?
a tax that takes the same proportion of income whatever the level of income
What is a regressive tax?
a tax that takes a lower proportion of income from those on higher incomes
What is a budget deficit/fiscal deficit?
the annual amount the government
borrows to make up the gap between its income and its spending.
A net injections into the circular flow G>T; it is a flow
What is National debt (public sector net debt)?
a stock of the total accumulation of budget deficits (government borrowing) that is still to be repaid
What is a balanced budget?
G=T
What is a budget surplus?
a net withdrawal from the circular flow G<T; the government may be able to pay back some of its debt
