Unit 5 - Government Macroeconomic Intervention Flashcards
(8 cards)
Define
Fiscal Policy
the use of taxation and public expenditure to solve the macro-economic problems
Define
Government debt
and list components
A financial plan that outlines the government expenditures and expected revenues for a specific year
Revenues - from taxes fees and fines and state owned enterprise
Expenditure - Public goods , social welfare and defence
What is a government deficit and its implications
this is when government expenditure exceeds revenue
leads to more borrowing to finance the expenditure leading to an increase in national debt
What is a government surplus and its implications?
When revenue exceeds expenditure
Implication - surplus can be used to pay previous debts, reducing debt or can be used to reinvest into the country
Define
National Debt
Total amount of money that a country’s government has borrowed, bot internal and external, that is not yet repaid
Describe
Effects on National debt on a country
- higher debts lead to higher obligations that will reduce expenditure in future years
- high debts will impact a countriy’s credit rating and affect economic stability, meaning they may not get loans when they really need them
- Current borrowing may place financial burdens on future generations, limiting development
Describe
Types of Debt
Direct - Tax placed directly on individuals and coorporations. Tax incidence can not be shifted eg Corporation and income tax
Indirect - Levied on goods and services. tax burden is transferrable depending on PED and PES
Describe
The Tax Structures
- **Progressive **- increses as the taxable amount increases (Richer pay more)
- Regressive - decreases as the taxable amount increases pay more (poorer pay more)
- Proportional - Flat percentage tax rate irregardless on the taxable amount (regressive in nature as it is a higher proportion of the poor’s income)
