T5 Fiscal Policy Flashcards

1
Q

What does fiscal policy involve

A

Government spending and taxation

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2
Q

What is government spending

A

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

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3
Q

What at are the 3 types of government spending

A

Capiital
Current
Transfer Payments

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4
Q

What is capital spending (by the gov)

A

Investment on infrastructure

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5
Q

What is current spending (by the gov)

A

Money spent on day to day public goods and services

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6
Q

What is transfer payments (by the gov)

A

Spending on things like benefits

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7
Q

What is taxation

A

The main source of income for the government

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8
Q

What are the types of taxation

A

Direct and indirect

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9
Q

What is indirect taxation

A

Tax on expenditure

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10
Q

What is direct taxation

A

Tax on earningsand profits

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11
Q

What are the type of tax systems(3)

A

Progressive
Regressive
Proportional

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12
Q

What are regressive and progressive tax systems

A

Where the proportion of tax changes as income does

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13
Q

What is proportional tax system

A

Where the proportion of tax stays the same as income changes

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14
Q

What is hypothecation

A

When taxes are raised to avoid things,

e.g. increased tax on cigarets to disincentives smoking

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15
Q

What types of fiscal policy are there

A

Contractionary and expansionary

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16
Q

What is contractionary fiscal policy

A

Where gov spending decrease or taxes increase or both

17
Q

What is expansionary fiscal policy

A

Where gov spending increases or taxes decrease or both

18
Q

What is a budget deficit

A

Where tax revenue is less than spending

19
Q

What is a budget surplus

A

Where spending is less than tax revenue

20
Q

What is a cyclical budget

A

Where the budget changes based on fluctuations in economic activity

21
Q

What is a structural budget

A

Where the budget results from fundemental changes in the economy

22
Q

What are the fiscal policy rules(2)

A

The golden rule

The sustainable rule

23
Q

What is the golden rule

A

Where the government only borrow to invest in social capital

24
Q

What is the sustainable rule

A

What public sector debt is 40% less than GDP

25
What are some limitations of Fiscal Policy(4)
Time Lags The size of the impact of AD (hard to determine impact) Lack of accurate data Macro Policy conflict
26
What are some effects of Fiscal Policy(3)
Influences demand Influences investment Investmnet employment rates
27
What are fiscal policy automatic stabilisers
Tools to infleucne GDP and counter flcutations in the eco cycle
28
What does the laffer curve show
The trade off and effects of tax rate on tax revenue
29
what will auto stabilisers do in a boom
cushion demand and ensure it doesnt rise too much
30
which will auto stabilisers do in a recession
aim to support demand and boost it
31
examples of auto stabilsiers
tax revenues rising as incomes do benefitts and unemployment rises
32
specific exmaples of auto stabilsiers
progressive taxes welfare and unemploymetn beenfits
33
example of auto stabilsiers in a boom
low unemployment reducing levels of benefits
34
examples of auto stabilsiers in a reccession
as incomes fall people fall into lower tax bands
35
what is fiscal auesterity
a polciy approachthat involves reducig spending and inc taxes ro reuce deficit and debt