Fiscal Policies

Question 1

fiscal policy

Answer 1

Fiscal policy involves the government changing the levels of taxation and government spending in order to influence aggregate demand (AD) and the level of economic activity.

Question 2

lower income tax rates

Answer 2

increase in disposable income–increase C –increase ad increase growth

incetive join workforce–increase quantity of wforce increase lrac

Question 3

higher vat

Answer 3

increase vat –increase cop–fall in sras –fall in growth

Question 4

low corp

Answer 4

high retained profit–more investment increase ad +mult
increase growth +acceleator effect

however depends on spare capacity(forest at 0.75) BOE

Question 5

when in the economic cycle would the government automatically go towards a cyclcial budget surplus

Answer 5

boom–increase growth–incomes increase tac rev

Question 6

drawbacks of high level of gov debt

Answer 6

increase debt–fall in g

higher future taxes
more g borrowing from private sector
fall in future g

Question 7

CROWDING OUT

Answer 7

g borrowing on private sector–fall in retained profit–fall in I

Question 8

crowding in

Answer 8

increase g on spending –increase ad increase growth increase business confidence increase I
judgement–in recession less likely

Question 9

laffer curve

Answer 9

x axis rates
y axis rev

Question 10

lower income corp tax increase tax rev

Answer 10

lower income rate –increase incentive to join work force size–increase tax rev

less tax avoidance and less braind drain increase tax rev

lss corp tax more start ups

rate cut from 20% to 19%(liz truss 2022)