Fiscal Policy

HideShow resource information
Fiscal Policy
Involves the government changing the levels of taxation and government spending in order to influence AD
1 of 8
Expansionary (loose) Fiscal policy
Involves increasing AD, therefore government will increase spending (G) and/or cut taxes leading to a bigger budget deficit
2 of 8
Deflationary (tight) Fiscal policy
Involves decreasing AD therefore government will cut spending (G) and increase taxes leading to a reduced budget deficit
3 of 8
Automatic Stabilisers
If economy is growing, people will automatically pay more taxes, and government will spent less on unemployment benefits.
4 of 8
In a recession
Borrowing will increase and tax revenues fall and spending on benefits increases
5 of 8
Discretionary stabilisers
A deliberate attempt by the government to affect AD and stabilise the economyeg in a boom the government could increase taxes to reduce inflation
6 of 8
Injections (J) define
Increase of expenditure into the circular flow includes government spending (G), Exports (X) and Investment (I)
7 of 8
Withdrawals (W) define
Leakages from the circular flow including net savings (S) +Net Taxes (T) + Net Imports (M)
8 of 8

Other cards in this set

Card 2

Front

Expansionary (loose) Fiscal policy

Back

Involves increasing AD, therefore government will increase spending (G) and/or cut taxes leading to a bigger budget deficit

Card 3

Front

Deflationary (tight) Fiscal policy

Back

Preview of the front of card 3

Card 4

Front

Automatic Stabilisers

Back

Preview of the front of card 4

Card 5

Front

In a recession

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all Fiscal policy resources »