Government Expendature 2.2.4

Question 1

What is Fiscal Policy

Answer 1

The means by which a government adjusts its spending levels and tax rayes to monitor and influence a nations economy and it relates to: gov spending, taxation and gov borrowing

Question 2

What are the top five areas of Goverment Spending?

Answer 2

social protection
health
education
debt intrest
defence

Question 3

What are the top 5 areas of Taxation?

Answer 3

Income tax
Value Added Tax/VAT
NI contrabutions
other tax
other non-taxes

Question 4

What does fiscal policy do?

Answer 4

It is used to change the pattern of spending it impacts on the level and growth of AD, output and jobs. Using fiscal policy to manipulate AD is called demand management.

Question 5

What is Expansional Fiscal Policy?

Answer 5

When the gov increces spending and reduce tax to boost economy. This leads to a budget deficit (when the gov spends more than they recive in tax).

Question 6

What is Deflationary Fiscal Policy?

Answer 6

Happens if taxes increaced and gov spending is reduced. This may lead to a budget surpus (when taxes are greater than spending).

Question 7

What is crowding out?

Answer 7

When govermant spending increases.

Question 8

What is the fiscal multiplier?

Answer 8

The ratio of the change in national income arising from an exogenous change in government spending or revenue plans. Similar to circular flow of income.

Question 9

What happens in a boom?

Answer 9

Tax collected +
Gov spending-
AD grows at a slower rate

Question 10

What happens in a recession?

Answer 10

Tax collected -
Gov spending +
AD falls at a slower rate