Chapter 11 Fiscal Policy Summary lecture notes

Chapter 11 Fiscal Policy Summary lecture notes - Chapter...

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Chapter 11- Fiscal Policy Fiscal Policy Government: Spending and Taxation The Multiplier Effect Fiscal Policy and the AD/AS Model Automatic Stabilizers Possible Obstacles to Effective Fiscal Policy The Federal Government Debt
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Fiscal Policy Fiscal Policy The use of government spending and/ or taxes to alter RGDP and the price level . Stimulate the economy during a contraction (or recession). Curb an expansion in order to bring inflation under control.
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Fiscal Policy Contractionary Fiscal Policy When the government wishes to dampen a boom by reducing aggregate demand . Reduce government spending and/or increase taxes. Will increase a budget surplus (or reduce a budget deficit).
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Government: Spending and Taxation Government Spending Federal government spending: 31% social services (old age security, EI) 13% interest payments 12% national defence 12% transfers to provincial governments (post-secondary education, health care)
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Government: Spending and Taxation Government Spending Provincial government spending: 28% health care 22% education 15% social services (welfare and social assistance programs) 7% interest payments
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Government: Spending and Taxation
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Government: Spending and Taxation Government Revenue Federal government revenue: 67% personal and corporate taxes 20% consumption taxes 7% social security contributions 6% other
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Government: Spending and Taxation Government Revenue Provincial and local government revenue: 25% income taxes 16% consumption taxes 13% property taxes 16% transfers from federal government 11% sale of goods and services
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Government: Spending and Taxation
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Government: Spending and Taxation Types of Tax Progressive tax - the amount of an individual’s tax rises as a proportion of income, as the person’s income rises. Those with higher incomes pay a greater proportion of their income in taxes. One method of redistributing income.
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and Taxation Types of Tax Regressive tax - the amount of an individual’s tax falls as a proportion of income, as the person’s income rises. Takes a greater proportion of the
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Chapter 11 Fiscal Policy Summary lecture notes - Chapter...

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