Fiscal policy Flashcards
1
Q
The formula for Government Deficit/Surplus is:
A
Govt spending - Govt revenue
2
Q
A worded definition of Government Deficit/Surplus is:
A
The amount of new debt a governement needs to finance its operations
3
Q
What are 4 problems when measuring the deficit?
A
- Inflation
- Capital assets
- Unacounted liabilities
- The business cycle
4
Q
What is better than “change in debt” for a surplus definition?
A
Capital budgeting
5
Q
What is capital budgeting?
A
Change in debt - Change in assets
6
Q
What are some unaccounted government liabilities?
A
- Future owed pension payments
- Future social security payments
7
Q
According to Ricardian equivalence, a debt financed tax cut has __ effect of C, S, i, I, NX, or RGDP
A
No
8
Q
Many economists argue that the deficit should be used to:
A
- Stabilise output and unemployment
- Smooth taxes
- Redistribute income across generations
9
Q
Standard deficit figures don’t account for:
A
- Inflation
- Changes in govt. assets
- Hidden liabilities
- Effect of business cycles
