Yr 11: Fiscal Policy Flashcards
What is fiscal policy?
The use of taxation and government spending to stabilise the business cycle
What are the 3 budget outcomes?
Surplus, balanced, deficit
What are the 3 fiscal stances?
Contractionary, neutral, expansionary
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $60m and spending of $65m. What is the government’s budget outcome in Year 2?
$5m deficit
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $60m and spending of $65m. What is the government’s fiscal stance in Year 2?
Contractionary
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $60m and spending of $60m. What is the government’s budget outcome in Year 2?
Balanced budget
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $60m and spending of $60m. What is the government’s fiscal stance in Year 2?
Contractionary
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $40m and spending of $60m. What is the government’s budget outcome in Year 2?
$20m deficit
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $40m and spending of $60m. What is the government’s fiscal stance in Year 2?
Neutral
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $40m and spending of $35m. What is the government’s budget outcome in Year 2?
$5m surplus
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $40m and spending of $35m. What is the government’s fiscal stance in Year 2?
Contractionary
In Year 1, the government has tax of $50m and spending of $70m. In Year 2, the government has tax of $60m and spending of $85m. What is the government’s fiscal stance in Year 2?
Expansionary
How could a government be in a surplus and have an expansionary fiscal stance at the same time?
If the government’s surplus decreased from the previous year
What is the difference between discretionary and non-discretionary changes to fiscal policy?
Discretionary is a deliberate change to spending or taxation, whereas non-discretionary changes occur automatically with the business cycle
What is an example of a discretionary change to tax?
The government raises the percentage paid as tax for income tax or company tax