Changes in the expenditures or tax revenues of the federal government.
2 tools include:
1) Taxes- government can increase or decrease taxes
2) Spending - government can increase or decrease spending
Fiscal Policy is enacted to promote our nations economic goods, full employmen, price stability, and economic growth.
Deficits, Surpluses, and Debt
Balanced budget
- revenues = expenditures
Budget Deficit
- revenues < expenditures
Budget Surplus
- revenues > expenditures
Government Debt
- sum of all deficits - sum of all surpluses
Government must borrow money when it runs a budget deficit.
Government borrows money from:
- individuals (taxes)
- corporations
- financial institutions
- foreign entitles or governments
Fiscal policy (Two options):
Discretionary fiscal policy - think deficit
- contractionsry policy - think surplus
Non-discretionary fiscal policy(no action)
Government (congress/president) is in control of fiscal policy
2 tools include:
1) Taxes- government can increase or decrease taxes
2) Spending - government can increase or decrease spending
Fiscal Policy is enacted to promote our nations economic goods, full employmen, price stability, and economic growth.
Deficits, Surpluses, and Debt
Balanced budget
- revenues = expenditures
Budget Deficit
- revenues < expenditures
Budget Surplus
- revenues > expenditures
Government Debt
- sum of all deficits - sum of all surpluses
Government must borrow money when it runs a budget deficit.
Government borrows money from:
- individuals (taxes)
- corporations
- financial institutions
- foreign entitles or governments
Fiscal policy (Two options):
Discretionary fiscal policy - think deficit
- contractionsry policy - think surplus
Non-discretionary fiscal policy(no action)
Government (congress/president) is in control of fiscal policy
Discretionary VS. Automatic
Discretionary: Government spending or taxes in order to return the economy to full employment. Policy involves policy makers doing fiscal policy in response to economic problems.
Automatic: Examples include unemployment compensations and marginal tax rates.
It helps mitigate the effects of recession and inflation. Takesneithout polciy makes having to respond to economic problems.
Contractionary vs. Expansionary
Contractionary: policy designed to decrease AD
- strategy for controlling inflation
Decrease in govt spending, increase in taxes
Expansionary: policy designed to increase AD
- strategy for increasing GDP, combatting a recession, and reducing unemployment.
Recession is countered with expansionary policy.
Increase government spending, and decrease taxes
Automatic and Bulit in Stabilizers
Anything that increase the governments budget deficits during a recession and increases its budget surplus during inflation without requiring explicit action by policy makers.
1. Transfer payments
2. Welfare checks
3. Food stamps
4. Unemployment checks
5. Corporate dividends
6. Social security
7. Veterans benefit
Progressive tax system:
- Average tax rate
Proportional tax system:
- Average tax remains constant as GDP changes
Regressive Tax System:
- average tax rate falls within GDP
The average tax rate is (tax revenue/ GDP) dont forgot to add the formula and also progressive tax system the average tax rises with GDP. One minor mistake is noticed is where you have listed transfer payments and you listed transfer payments as one of the transfer payments so you might want to go back and fix it and add it as a subheading instead :)
ReplyDeleteFor the examples of Automatic fiscal policy, the examples should be explained in greater detail for those who would want to know what is unemployment compensation and marginal tax rates consist of and there was also a typo in the sentence right below the example. Overall, notes were good.
ReplyDelete