Fiscal Policy Flashcards

1
Q

Define fiscal policy

A

Government policy regarding government expenditure and taxes

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2
Q

Define stabilisation policy

A

Action undertaken by government to keep actual and trend output close

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3
Q

Define budget deficit

A

When government expenditure exceeds tax revenue

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4
Q

Define national debt

A

Stock of outstanding government debt

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5
Q

What is disposable income with government in economy?

A

Yd=Y-NT

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6
Q

Define aggregate demand with a government

A

AD=C(0)+c(Y-NT)+I+G

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7
Q

What is the equilibrium level of output with government

A

(1/1-c)(C(0)-cNT+I+G)

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8
Q

What is the balanced budget multiplier

A

If the government increase net taxes and government expenditure by the same amount it will result in an overall increase in AD and therefore output because G flows directly into the economy whereas NT flow indirectly in through the consumption function

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9
Q

What is savings? (with government)

A

Y-C-NT=I+G-NT

savings finance private investment and the public deficit

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10
Q

Define automatic stabilisers

A

Mechanisms in the economy that help reduce the change in output in response to an economic shock

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