Fiscal Policy

Flashcards on the key terms involved with Fiscal Policy

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Budget surplus
When the amount of tax the Government recieves is greater than the amount of money it spends.
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Budget deficit
When the Government spends more than it receives in tax.
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Public sector debt repayment
The Government's previous debt, some of which can be paid off when the Government has a budget surplus.
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Public sector net cash requirement
When the Government have a budget deficit and need to borrow money to meet the shortfall.
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Expansionary fiscal policy
Increases AD through a decrease in tax/increase in spending. Used in a recession.
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Contractionary fiscal policy
Decreases AD though an increase in tax/decrease in spending. Used in a boom.
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Govenment debt
The total amount of money the Government owes, from all the previous deficits.
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Government deficit
The amount of money the Government owes IN ONE YEAR.
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Discretionary fiscal policy
Deliberate changes to government spending
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Current spending
Money spent on the Governments day to day expenses which get 'used up', e.g stationary, wages.
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Capital spending
Spending on long-term fixed assets that will add to the capital stock of the economy and should facilitate economic growth, e.g a new school, new infrastructure.
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Transfer payments
Money spent with no expectation of a good or services on return, e.g pensions, benefits.
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Direct taxation
Taxes on income and profits.
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Indirect taxation
Taxes on expenditure
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Level of spending
The amount of money that is being spent
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Pattern of spending
Where the money is being spent, e.g in which economies.
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Crowding out
Where there is less room for private sector investment who may be more effective at provision of the service, because the Government are spending more.
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Political myopia
Where the Government only consider a policy's effects in the short term.
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Other cards in this set

Card 2


Budget deficit


When the Government spends more than it receives in tax.

Card 3


Public sector debt repayment


Preview of the front of card 3

Card 4


Public sector net cash requirement


Preview of the front of card 4

Card 5


Expansionary fiscal policy


Preview of the front of card 5
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This resource contains 18 cards with the main definitions required for an understanding of fiscal policy. Good for testing yourself or others.

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