Fiscal Policy Flashcards
What is the government budget?
a forecast by the government of its expenditures and revenues for a specific time period
What are the 3 components to the government budget
1) expenditure
2) receipts
3) borrowing requirement
What will a good tax do?
1) will generate lots of revenue
- work in the way intended by those who introduced it
- will avoid undesirable side effects e.g large businesses closing down and moving location
What are the 3 main areas of government expenditure?
capital expenditure - improving stock of country e.g schools
current expenditure - running public services everyday e.g NHS wages
Transfer payments - benefits (from tax payer)
what is progressive tax?
a tax who takes a larger percentage of income from high income groups and vice versa.
What is proportional tax?
tax that takes the same percentage from all income groups
What is regressive tax?
a tax that took a larger percentage from those with lower incomes
What are direct tax?
collected on the income or profits of the person who pays it
what is indirect tax?
collected on goods and services
When is there a budget deficit?
government spends more than is received
When is the a budget surplus?
government spend less than it receives
When is there a balanced budget?
government plans to spend the same they receive in tax
Budget deficit are often E………
budget deficit are often EXPANSIONARY. they want to increase AD
Budget surplus is often…D
Budget surplus is often DEFLATIONARY. they reduce AD
A balanced budget is N….
A balanced budget is Neutral Fiscal. The government is not try to influence AD
