Fiscal Policy
Aggregate Supply and Demand
Leakages and Injections
Government Budget Options
Drawbacks and Limitations to Fiscal Policy
100
Means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.
What is the Fiscal Policy?
100
Total demand of all goods and services produced in an economy. As price level rise, total real output (or aggregated quantity demanded) falls. Aggregate at each price level is equivalent to the GDP that would occur at a price level. For real economic growth, aggregate quantity demanded at each price must increase.
What is aggregate demand?
100
Leakages: Leakage means withdrawal from the flow. Injections: Injection means the introduction of income into the flow.
What are Leakages and Injections?
100
Government document presenting the government's proposed revenues and spending for a financial year.
What is Government Budget?
100
-Recognition -Decision -Implementation -Impact
What are the 4 Time Lags?
200
Governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending.
How does the Fiscal Policy work?
200
The total supply of all goods and services produced in a society.
What is aggregate supply?
200
Savings = S, Investment = I, Taxes = T, Gov Spending = G, Imports = M and Exports = X
What are the coded letters and what do they stand for?
200
Only certain types of revenue may be imposed and collected. Property tax is frequently the basis for municipal and county revenues, while sales tax and/or income tax are the basis for state revenues, and income tax and corporate tax are the basis for national revenues.
What is an example?
200
Decision Lag
What is "Time required for the government to determine most appropriate policy."?
300
In 2012 many worried that the fiscal cliff, a simultaneous increase in tax rates and cuts in government spending set to occur in January 2013, would send the U.S. economy back into recession.
What is an example?
300
The aggregate demand curve shows, at various price levels, the quantity of goods and services produced domestically that consumers, businesses, governments and foreigners (net exports) are willing to purchase during the period of concern. The curve slopes downward to the right, indicating that as price levels decrease (increase), more (less) goods and services are demanded.
What is the aggregate demand curve?
300
- Financial Sector - Government Sector - Overseas Sector
What are the 3 Sectors?
300
when anticipated revenues exceed expenditure.
What is Surplus Budget?
300
-Difficulties in changing spending and taxation policies -The conflict between levels of government over appropriate policies. -Regional variations -Size of debt can limit use of Fiscal Policy
Give an example of a drawback.
400
To find a balance between changing tax rates and public spending.
What is the Balancing Act?
400
The aggregate supply curve shows the relationship between a nation's overall price level and the quantity of goods and services produced by that nation's suppliers. The curve is upward sloping in the short run and vertical, or close to vertical, in the long run.
What is the aggregate supply curve?
400
Overseas
What is "in terms of, The circular flow of income model, the main leakage from this section is imported (M), which represent the spending by residents into the rest of the world. The main injection in this section is the exports of goods and services, which generate an income for exporters from overseas workers/residents. An example would be Canada exporting wood to the USA, the USA pays the exporter for the wood, in which more money enters the economy, which makes it an injection. Another example is China processing the wool into items such as coats and Australia importing the product by paying the Chinese exporter; since the money paying for the coat leaves the economy it is a leakage."
400
Deficit Budget
Which one is "when anticipated expenditure is greater than revenues"?
400
Deficits impose net burden on future generations.
What is "Foreign-owned debt removes capital from the economy"?
500
"Governments should influence macroeconomic productivity levels"
What did John Maynard Keynes say about governments?
500
Demand: Downward Sloping Supply: Upward Sloping
What is the difference between the two curves?
500
The circular flow of income or circular flow is a model and or diagram in which the major exchanges are represented as flows of money, goods, and services, etc. between economic agents. 1. Household sector 2. Firms or Producing sector 3. Financial sector 4. Government sector 5. Rest of the world/Overseas sector
What is the Circular Flow of Income and what does the Chart state?
500
This document estimates the anticipated government revenues and government expenditures for the ensuing (current) financial year.
What does the document do?
500
-Increases interest rates -Reduces amount of funding for private investment
What is "Crowding out of private investment"?
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