fiscal policy

Question 1

what is fiscal policy?

Answer 1

changes in federal taxes and spending aimed at influencing the economy to achieve macro-economic objectives

Question 2

components of the federal budget.

Answer 2

expenditure & revenue

Question 3

sources of revenue for federal

Answer 3

taxes individual
tax comapnies
indirect taxes
non-tax revenue

Question 4

sources of expenditure

Answer 4

expenditure on goods + services
transfer payments
interest + other payment

Question 5

what is discretionary fiscal Policy?

Answer 5

action initiated by parliament usually federal budget ie; stimulus package

Question 6

what is an automatic stabiliser

Answer 6

changes in expenditure and revenue triggered by changes in level economic activity. Try to stabilise the economy without explicit government intervention. the action by the government is not deliberate. Relies on business cycle

Question 7

multiplier effect.

Answer 7

when the government purchase something which will increase output by more than the initial amount of increase

Question 8

mpc

Answer 8

marginal propensity to consume

Question 9

limitations of fiscal policy

Answer 9

timing lags and crowding out.

Question 10

explain timing lags

Answer 10

recognition lag- time taken for policymakers to know about problem
legislative lag- time takes the policy to be approved in federal parliament
implementation- time taken to implement policy

Question 11

what is crowding out

Answer 11

when government expenditure increases meaning private expenditure decreases. government borrow funds which then means interest rate increases and private spend less