-changes in the expenditures or tax revenues of the federal government
- 2 tools of fiscal policy
- taxes- government can increase or decrease taxes
- spending- government can increase or decrease spending
fiscal policies is enacted to promote our nation's economic goal: full employment, price stability, 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 or all surplus
- borrows from
- individuals
- corporations
- financial institutions
- foreign entities or government
FISCAL POLICY TWO OPTIONS
- discretionary fiscal policy (actions)
- expansionary fiscal policy- think deficit
- contractionary fiscal policy- think surplus
- non- discretionary fiscal policy ( no action)
Let it be noted that contractionary fiscal policy is designed to decrease aggregate demand and is a strategy for controlling inflation. On the other hand, expansionary fiscal policy is designed to increase aggregate demand and is a strategy for increasing GDP, combating a recession, and reducing unemployment.
ReplyDeleteVery nicely organized! In addition to your notes, I suggest including the fact that the government controls fiscal policy (Congress and the President), as well as how discretionary fiscal policy is increasing/decreasing government spending and/or taxes in order to return the economy to full employment, whereas automatic fiscal policy deals with policies that help mitigate the effects of recession and inflation (such as unemployment compensation & marginal tax rates).
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