Macroeconomics - L15 Budgetary Policy Flashcards
What is budgetary policy?
The manipulation of government income (revenue) and outlays (expenditure) to assist the achievement of the government’s economic and social goals.
What are the government’s economic and social goals?
Economic Goals:
To achieve domestic stability through SSEG between 3 and 3.5%, full employment (U/e between 4 and 4.5%) and low inflation between 2 and 3%.
Social goals:
To maximise living standards of the Australian people (material and non-material).
What are the top 3 sources of revenue for the government?
- Personal Income Tax
- Company Tax
- Goods and Services Tax
What does the government spend most of its revenue on?
Social security and welfare
What are the two types of Budget Outcomes?
Budget Surplus
Budget Deficit
What is a Budget Surplus
Receipts > Outlays
The government plans to receive more money than it intends to spend.
What is a Budget Deficit?
Outlays > Receipts
The government plans to spend more than it will receive.
What are the two stances or positions that the government can take when delivering the Budget?
Contractionary Stance
Expansionary Stance
When the federal government runs a Budget Deficit, what stance is the government taking?
Expansionary.
By spending more than it will receive, the government is trying to stimulate economic activity by encouraging spending.
When the federal government runs a Budget Surplus, what stance is the government taking?
Contractionary.
By planning to spend less than it will receive, the government is trying to slow economic activity and discourage spending.
At which stage/s of the business cycle would the government likely take an expansionary stance with the Budget?
Trough or Contraction.
At which stage/s of the business cycle would the government likely take a contractionary stance with the Budget?
Peak or Expansion
