Fiscal Policy Components
Government policies regarding taxation and spending that influence real GDP and potential GDP's long-term growth rate.
What is Fiscal Policy?
The primary document outlining a government's plan for taxation and spending.
What is the Government Budget?
The total value of all goods and services produced by an economy, adjusted for inflation.
What is Real GDP?
Government income received from taxation, used to fund various programs.
What is Tax Revenue?
Total expenditures by the government on various programs that impact the economy.
What is Government Spending?
Policies designed to counteract economic fluctuations, often involving increased spending or decreased taxes during a recession.
What is Countercyclical Fiscal Policy?
Occurs when government expenditures exceed its revenues, leading to increased national debt.
What is the Budget Deficit?
The maximum output an economy can produce without causing inflation, indicating the economy's capacity.
What is Potential GDP?
A tax system where the tax rate increases with the taxable amount, used for income redistribution.
What are Progressive Tax Rates?
Payments to individuals from the government, such as Social Security and welfare, without direct exchange of goods
What are Transfer Payments?
Fiscal policy resulting from deliberate actions by policymakers, rather than automatic adjustments, typically involving direct changes in spending or taxation.
What is Discretionary Fiscal Policy?
Occurs when government revenues exceed its expenditures, allowing for the reduction of national debt.
What is the Budget Surplus?
An economic model analyzing the relationship between total spending (Aggregate Demand) and economic performance.
What is the AD-IA Model?
Reductions in taxes owed by taxpayers to stimulate spending and economic growth.
What are Tax Cuts?
Payments made by the government on its existing debts, a significant part of government expenditures.
What are Interest Payments?
Policies, such as increased public spending and tax cuts, aimed at expanding economic growth.
What is Expansionary Fiscal Policy?
The total amount of money that a government owes, which increases with deficits and decreases with surpluses.
What is the National Debt?
Variations in economic activity over time, including expansion and contraction phases.
What are Economic Fluctuations?
A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. This is opposite to progressive tax and tends to place a higher burden on lower-income earners.
What is a Regressive Tax?
Classifications of government spending, including health, defense, education, and welfare.
What are Expenditure Categories?
Economic policies and programs that automatically adjust to economic changes without deliberate intervention, such as increasing welfare spending during a recession.
What are Automatic Stabilizers?
The budget surplus that would occur if real GDP equals potential GDP, representing the economy's normal condition without cyclical fluctuations.
What is the Structural Surplus?
The cycle of economic expansion and contraction that occurs over time in a capitalist economy, marked by phases of boom and bust.
What is the Business Cycle?
Taxes that are not directly paid by an individual but instead are levied on the manufacturer or supplier who then passes the tax on to the consumer, such as sales tax or VAT.
What is an Indirect Tax?
Funds used by a government to acquire, upgrade, and maintain physical assets such as buildings, technology, or infrastructure.
What are Capital Expenditures?