An Introduction to Fiscal Policy
- Fiscal Policy involves the use of government spending and taxation (revenue) to influence aggregate demand in the economy
- Fiscal policy can be expansionary in order to generate further economic growth
- Expansionary policies include reducing taxes or increasing government spending
- Expansionary policies include reducing taxes or increasing government spending
- Fiscal policy can be contractionary in order to slow down economic growth or reduce inflation
- Contractionary policies include increasing taxes or decreasing government spending
- Contractionary policies include increasing taxes or decreasing government spending
- Fiscal Policy is usually presented annually by the Government through the Government Budget
- A balanced budget means that government revenue = government expenditure
- A budget deficit means that government revenue < government expenditure
- A budget surplus means that government revenue > government expenditure
- A budget deficit has to be financed through public sector borrowing
- This borrowing gets added to the public debt