9 ~ Fiscal Policy and Supply-Side Policies

Question	Answer
What does fiscal policy involve?	G T gov borrowing to affect the level of AD, GDP and U
What do changes in FP affect?	AD AD
What is an expansionary FP?	↑G ↓T
What is a contractionary FP?	↓G ↑T
When is an expansionary FP used?	to stimulate AD
When is contractionary FP used?	to reduce the size of the budget deficit
What are direct taxes?	taxes levied on Y, profit and wealth the burden of T cannot be passed on
What are indirect taxes?	T on spending producers may pass on an indirect T
What does it mean when an economy is running a budget deficit?	G>T
What are SSPs?	policies aimed improving the quality and quantity of output
What are examples of SSPs? (7)	subsidies privatisation ↑competition T on Y immigration NMW education + training
What are the problems with SSPs? (5)	v big time lags big opportunity cost needs to be sufficient D low PL could be cancelled out by PME very expensive

Resource summary

	Created by Tara Pugal about 8 years ago