Fiscal Policy
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| What is the governments budget? | show 🗑
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| show | 1. To state the scale and allocation of the Govs outlays and its plans to finance those activities
2. To stabilise the economy
3. To encourage the economy's long term growth and balance regional development
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| show | 1. Receipts
2. Outlays
3. Budget balance
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| Which 4 sources to receipts come from? | show 🗑
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| What are the three broad categories of outlays | show 🗑
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| show | 1. Balanced budget Gov spending = Tax receipts
2. Budget surplus - Gov spending is < Tax receipts
3. Budget deficit - Gov spending is > Tax receipts
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| What is government debt? | show 🗑
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| What are the five ways to cope with fiscal imbalances? | show 🗑
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| show | 1. Expansionary fiscal policy
2. Contractionary fiscal policy
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| show | Aimed to reduce unemployment by increasing Gov spending and/or reducing taxes (Ad curve shifts LEFT)
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| show | Aimed to reduce inflation by decreasing gov spending and/or increasing taxes (AD curve shifts RIGHT)
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| show | The idea that if the government spends e.g. £1 billion, national income will not only increase by £1 billion, but will generate further spending, which will in turn generate more spending etc.
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| show | May crowd out private investment
The size of the multiplier may not be known
Policy take times to work
Does the policy have the desired effect?
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| show | before changing gov expenditure or taxation the gov will need to calculate the affect of any changes would have on national income, employment, and inflation
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| Why may gov predictions over the effect changes to gov expenditure may be, be unreliable? | show 🗑
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| show | can involve significant time lags, that if long enough could even destabilise the economy
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| Problems of timing for expansionary policy? | show 🗑
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| Problems of timing for contractionary policy? | show 🗑
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Created by:
Joph
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