fiscal policy - 13(a Define the term fiscal policy Fiscal...

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13. (a) Define the term ‘fiscal policy’ . Fiscal Policy -- Fiscal policy denotes the uses of taxes and government expenditures. Which include changes in government expenditures and tax rates; and a third, miscellaneous group, which includes policies to equip workers with skills they need to qualify for jobs. Fiscal policy influences the amount and maturity of government debt as well as the level, composition, and distribution of national output and income. Many summary indicators of fiscal policy exist. Some, such as the budget surplus or deficit, are narrowly budgetary. Others attempt to reflect aspects of how fiscal policy affects the economy. Fiscal policy refers to government purchases, transfer payments, taxes, and borrowing as they affect macroeconomic variables such as real GDP, employment, the price level, and economic growth. (Samuelson Nordhaus Chapter7 Part B Modern Inflation Theory Page345) For example, a decrease in the standardized-budget surplus (or increase in the standardized-budget deficit) measures the short-term stimulus of demand that results from higher spending or lower taxes. The fiscal gap measures whether current fiscal policy implies a budget that is close enough to balance to be sustainable over the long term. The fiscal gap represents the amount by which taxes would have to be raised, or spending cut, to keep the ratio of debt to GDP from rising forever. Other important measures of fiscal policy include the ratios of total taxes and total spending to GDP. The government's choice of tax and spending programs, which influences the amount and
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This note was uploaded on 01/26/2011 for the course AUDIT 1 taught by Professor Linda during the Spring '08 term at Acton School of Business.

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fiscal policy - 13(a Define the term fiscal policy Fiscal...

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