Slides in this set
Macroeconomic policy 3.2.4
Candidates should understand fiscal policy can
have both macro and microeconomic functions.
They should be able to explain how it could be used
to influence aggregate demand and aggregate
supply, and also how government spending and
taxation can affect the pattern of economic activity.…read more
In simple terms you need to
1. The function of fiscal policy.
2. How fiscal policy affects aggregate demand
and aggregate supply.
3. How government spending and taxation
affect the pattern of economic activity…read more
So what is fiscal policy?
Fiscal Policy - Decisions to manipulate
government spending, borrowing and taxation.
The government have been responsible for between
40% and 50% of national expenditure
Mainly on the NHS, defence, education and roads.
Government also transfers money around economy
in the form of social security and National
Insurance benefits financed through taxes.…read more
Balancing The Budget
Due to the government spending more than it
receives, in most years (post-war) it runs a Budget
They therefore have to borrow over a period of time
- known as the Public Sector Net Cash
Over three fiscal periods the govt received more
than it spent- this was a Budget Surplus.
There is then a negative PSNCR.
A budget surplus allows the govt to pay off some of
the National Debt.…read more