T5 Fiscal Policy

Question 1

What does fiscal policy involve

Answer 1

Government spending and taxation

Question 2

What is government spending

Answer 2

Money spent by the government on the public sector and investment into the public sector

Question 3

What at are the 3 types of government spending

Answer 3

Capiital
Current
Transfer Payments

Question 4

What is capital spending (by the gov)

Answer 4

Investment on infrastructure

Question 5

What is current spending (by the gov)

Answer 5

Money spent on day to day public goods and services

Question 6

What is transfer payments (by the gov)

Answer 6

Spending on things like benefits

Question 7

What is taxation

Answer 7

The main source of income for the government

Question 8

What are the types of taxation

Answer 8

Direct and indirect

Question 9

What is indirect taxation

Answer 9

Tax on expenditure

Question 10

What is direct taxation

Answer 10

Tax on earningsand profits

Question 11

What are the type of tax systems(3)

Answer 11

Progressive
Regressive
Proportional

Question 12

What are regressive and progressive tax systems

Answer 12

Where the proportion of tax changes as income does

Question 13

What is proportional tax system

Answer 13

Where the proportion of tax stays the same as income changes

Question 14

What is hypothecation

Answer 14

When taxes are raised to avoid things,

e.g. increased tax on cigarets to disincentives smoking

Question 15

What types of fiscal policy are there

Answer 15

Contractionary and expansionary

Question 16

What is contractionary fiscal policy

Answer 16

Where gov spending decrease or taxes increase or both

Question 17

What is expansionary fiscal policy

Answer 17

Where gov spending increases or taxes decrease or both

Question 18

What is a budget deficit

Answer 18

Where tax revenue is less than spending

Question 19

What is a budget surplus

Answer 19

Where spending is less than tax revenue

Question 20

What is a cyclical budget

Answer 20

Where the budget changes based on fluctuations in economic activity

Question 21

What is a structural budget

Answer 21

Where the budget results from fundemental changes in the economy

Question 22

What are the fiscal policy rules(2)

Answer 22

The golden rule

The sustainable rule

Question 23

What is the golden rule

Answer 23

Where the government only borrow to invest in social capital

Question 24

What is the sustainable rule

Answer 24

What public sector debt is 40% less than GDP

Question 25

What are some limitations of Fiscal Policy(4)

Answer 25

Time Lags
The size of the impact of AD (hard to determine impact)
Lack of accurate data
Macro Policy conflict

Question 26

What are some effects of Fiscal Policy(3)

Answer 26

Influences demand
Influences investment
Investmnet employment rates

Question 27

What are fiscal policy automatic stabilisers

Answer 27

Tools to infleucne GDP and counter flcutations in the eco cycle

Question 28

What does the laffer curve show

Answer 28

The trade off and effects of tax rate on tax revenue

Question 29

what will auto stabilisers do in a boom

Answer 29

cushion demand and ensure it doesnt rise too much

Question 30

which will auto stabilisers do in a recession

Answer 30

aim to support demand and boost it

Question 31

examples of auto stabilsiers

Answer 31

tax revenues rising as incomes do
benefitts and unemployment rises

Question 32

specific exmaples of auto stabilsiers

Answer 32

progressive taxes
welfare and unemploymetn beenfits

Question 33

example of auto stabilsiers in a boom

Answer 33

low unemployment reducing levels of benefits

Question 34

examples of auto stabilsiers in a reccession

Answer 34

as incomes fall people fall into lower tax bands

Question 35

what is fiscal auesterity

Answer 35

a polciy approachthat involves reducig spending and inc taxes ro reuce deficit and debt