- Explain that government spending can be classified into current expenditures, capital expenditures and transfer payments, providing examples of each.
- Distinguish between a budget deficit, a budget surplus and a balanced budget.
- Explain the relationship between budget deficits/surpluses and public (government) debt.
- Explain how changes in the level of government expenditure and/or taxes can influence the level of aggregate demand in an economy.
- Explain the mechanism through which expansionary fiscal policy can help an economy close a deflationary (recessionary) gap.
- Construct a diagram to show the potential effects of expansionary fiscal policy, outlining the importance of the shape of the AS curve.
- Explain the mechanism through which contractionary fiscal policy can help an economy close an inflationary gap.
- Construct a diagram to show the potential effects of contractionary fiscal policy, outlining the importance of the shape of the AS curve.
- Explain how factors including the progressive tax system and unemployment benefits, which are influenced by the level of economic activity and national income, automatically help stabilise short-term fluctuations.
- Evaluate the view that fiscal policy can be used to promote long-term economic growth (increases in potential output), indirectly by creating an economic environment that is favourable to private investment and directly through government spending on physical capital goods and human capital formation, as well as provision of incentives for firms to invest.
- Evaluate the effectiveness of fiscal policy.
US National Debt Clock : Real Time U.S. National Debt Clock
Tax Freedom Day ® is the first day each year that Americans work for themselves. In 2019 it arrived on April 16th. Every dollar earned before that pays for federal, state, and municipal government services. It's a way to visualize your tax burden.
1 Fiscal PolicyLesson Outcomes:
- To explain that the government earns revenue primarily from taxes (direct and indirect), as well as from the sale of goods and services and the sale of state-owned (government-owned enterprises)
- Explain that government spending can be classified into current expenditures, capital expenditures, and transfer payments and be able to provide examples of each
- Distinguish between budget surplus, deficit and a balanced budget
A interesting article about what happens when public finances aren't in good shape.
The human face behind mandatary social protection government expenditures in the UK.
case study: Tax Cuts and Jobs Act of 2017 (December 2017)
Evaluating FISCAL POLICY
PAPER 1 PRACTICE: 15 mARK qUESTIONS
(a) Using diagrams, describe how fiscal policy can be used to close recessionary and inflationary gaps. [10 marks]
(a) Explain the following statement: ‘Fiscal policy has a dual role: it can help smooth out short-term fluctuations in economic activity, and it can help promote growth in potential output.’ [10 marks]
(b) Evaluate the effectiveness of fiscal policy. [15 marks]
the bond market and the crowding-out effect