Fiscal Policy Flashcards
(12 cards)
What can be a link between fiscal policy and disposable income?
Income tax policy and disposable income available
What is a link between a fiscal policy and business investment?
-A policy on corporation taxes and businesses investment
What is a possible link for the balance of trade and a fiscal policy on imports?
-The taxation of imports such as tariffs can negatively impact the balance of trades.
Possible link for a fiscal policy and labour demand
A policy on national insurance rates for employers.
Possible link for a fiscal policy and consumption
Taxation on wealth/ assets.
Possible link for a fiscal policy and business research and development spending
Taxation
How can a fiscal policy that cuts income tax affect C
-Cut in personal income tax rates
-Leads to a boost in disposable income
-Adds to consumer demand
How can a cut in indirect taxes (VAT) affect D
Cut in indirect taxes can lead to lower prices
-this can lead to higher real incomes
-Adds to consumer demand so C increases
How can a cut in corporation tax affect AD
-Cut in corporation tax leads to higher “post tax” profits for businesses
-This adds to business capital spending
-I increases which is a component of AD
-SO AD INCREASES
How can a cut in tax on interest from saving affect AD
-Cut in tax on interest from saving leads to a boost of disposable income of people with savings
-Therefore they are more inclined to consume
-C increases so AD increases
What fiscal policy impacts import costs
Tariffs - negatively affects the country exporting the goods, which can worsen their balance of trades and increase their costs of production causing SRAS to increase
How can a reduction in income tax impact migration
It can cause inward migration of key workers.
