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What is a federal budget?
A 12-month projection of government spending and revenue, starting October 1st.
Define fiscal stimulus.
Expansionary fiscal policy to boost the economy (increased government spending, decreased taxes, increased transfers).
What is fiscal restraint?
Contractionary fiscal policy to cool down the economy (decreased government spending, increased taxes, decreased transfers).
What is government revenue?
Income from taxes (income, excise, regulatory).
Define government expenditures.
Spending on programs (discretionary and non-discretionary).
What is a budget surplus?
Revenue > Expenditures. Excess funds can pay down debt.
Define budget deficit.
Expenditures > Revenue. Requires borrowing, adding to the debt.
What is the national debt?
The total accumulation of deficits over the years.
What is expansionary fiscal policy?
Government policies that increase aggregate demand.
What is contractionary fiscal policy?
Government policies that decrease aggregate demand.
How does a budget deficit impact the national debt?
A budget deficit increases the national debt because the government must borrow money to cover the shortfall in revenue.
How does a large national debt affect future government spending?
A large national debt can reduce future spending flexibility because of interest payments on the debt.
How does fiscal stimulus impact aggregate demand?
Fiscal stimulus increases aggregate demand through increased government spending and/or decreased taxes.
How does fiscal restraint impact inflation?
Fiscal restraint decreases aggregate demand, which can help to reduce inflationary pressures.
How does decreased government spending impact economic growth?
Decreased government spending can slow down economic growth, especially if the economy is already weak.
How do increased taxes affect consumer spending?
Increased taxes reduce disposable income, leading to decreased consumer spending.
How do increased transfer payments affect aggregate demand?
Increased transfer payments increase disposable income, which can lead to increased consumer spending and aggregate demand.
How does a budget surplus affect the national debt?
A budget surplus can be used to pay down the national debt, reducing its overall size.
How does a large national debt impact interest rates?
A large national debt can put upward pressure on interest rates as the government borrows more money.
How does expansionary fiscal policy affect unemployment?
Expansionary fiscal policy aims to reduce unemployment by increasing aggregate demand and creating jobs.
What are the differences between a budget deficit and the national debt?
A budget deficit is the annual shortfall of revenue compared to expenditures, while the national debt is the accumulation of all past deficits.
What is the difference between fiscal stimulus and fiscal restraint?
Fiscal stimulus aims to boost the economy, while fiscal restraint aims to cool down the economy.
What is the difference between government revenue and government expenditures?
Government revenue is income from taxes, while government expenditures are spending on programs.