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Fiscal Policy
Why does the government use fiscal policy?
Federal Budget
Revenues consist of
outlays consist of
Budget Balance
Budget Surplus
Budget Deficit
Balanced Budget
Government Debt
Supply-Side Effects
Tax Wedge
When the quantity of labour employed decreases, potential GDP ______ and the supply-side effect of a rise in the income tax _____ potential GDP and _______ aggregate supply
Tax Wedge Rate Equation
Real Interest Rate Equation
Real After-Tax Rate Equation
Laffer Curve
A tax ______ the supply of loanable funds
At the tax rate T* on the Laffer curve, tax revenue is ________
Below T* on the Laffer curve, a rise in the tax rate _______ revenue
For a tax rate above T* on the Laffer curve, a rise in the tax rate _______ tax revenue
Discretionary Fiscal Policy
Automatic Fiscal Policy
Structural Surplus or Deficit
Cyclical Surplus or Deficit
Government Expenditure Multiplier
Tax Multiplier
if the government finances spending by borrowing, there is _________
An increase in government expenditure or a tax cut _______ aggregate demand
A decrease in government expenditure or a tax increase _______ aggregate demand
Removal of stimulus can act like a fiscal restraint and shift aggregate demand to the _______
Recognition Lag
Law-Making Lag
Impact Lag
