Public Sector Finances

Question 1

Discretionary fiscal policy

Answer 1

policy which is implemented through one off policy changes. It involves deliberate changes in gov spending and taxes with the intention of influencing AD. Keynes believed in gov spending during recession and finance this with more borrowing

Question 2

Automatic stabilisers are

Answer 2

policies which offset fluctuations in the economy - like the UK progressive income taxes and transfer payments

Question 3

Fiscal deficit

Answer 3

when expenditure exceeds tax revenue

Question 4

National debt

Answer 4

amount of money gov has borrowed at one time.

Question 5

Cyclical deficit

Answer 5

temporary deficit related to the state of the economy, deficit may occur during recessions when gov increase spending to stimulate economy.

Question 6

Structural deficit

Answer 6

deficit due to an imbalance in the revenue and expenditure of government, not related to business cycle.