Macroeconomic Objectives Flashcards
What is active fiscal policy definition?
Deliberate changes in fiscal policy (taxes and expenditure) which influence the path of economic growth
Automatic stabilisers definition
Automatic fiscal effects which influence the path of economic growth due to cyclical changes in tax revenue and welfare costs.
How does an automatic stabiliser work if gdp rises?
GDP rises (pro)
Tax Revenue rises (pro)
Welfare costs fall (pro)
Limits upturn (con)
Fiscal finances improve (pro)
The opposite happens if GDP falls
What are transfer payments?
Welfare payments provided to ensure a minimum standard of living
What is current government spending definition?
The ongoing running costs of government services
What is capital spending?
Provision and maintenance of key national infrastructure items
