Economic Growth, Low Unemployment, Low and stable rate of inflation, Balance of payments equilibrium, Balanced government budget, Protecting the environment, Greater income equality.
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How Fiscal Policy Reduces Inflation
By increasing taxes and reducing government expenditure, known as contractionary fiscal policy.
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How Fiscal Policy Reduces Unemployment
By reducing taxes and increasing government expenditure, which is known as expansionary fiscal policy.
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How Fiscal Policy Reduces the deficit on the current account
By increasing taxes and reducing government expenditure, as well as devaluation of exchange rates making exports cheaper and therefore more in demand.
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Fiscal Policy
Includes Government Spending and Tax
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Direct Taxes
These are based on income of households and firms.
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Types of Direct Tax
Corporation Tax, Capital Gains Tax and Inheritance Tax.
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Types of Indirect Tax
VAT, Ad Valorem, Excise Duties
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Supply Side Policies
Privatisation, Deregulation, Reducing Income Taxes, Increased Education, Weakening Trade Unions, Reducing Benefits, Improving Transport etc.
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Limitations of Supply-Side Policies
Can clash with other macroeconomic objectives, Opportunity Cost, Time-Lag.
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Monetary Policy
Interest Rates that help to control inflation.
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Other cards in this set
Card 2
Front
By increasing taxes and reducing government expenditure, known as contractionary fiscal policy.
Back
How Fiscal Policy Reduces Inflation
Card 3
Front
By reducing taxes and increasing government expenditure, which is known as expansionary fiscal policy.
Back
Card 4
Front
By increasing taxes and reducing government expenditure, as well as devaluation of exchange rates making exports cheaper and therefore more in demand.
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