chapter 26- fiscal policy

igcse economics (0455)- textbook definitions

budget

relationship between government spending and government revenue

budget deficit

government spending is higher than government revenue

budget surplus

government revenue is higher than government spending

national debt

the total amount the government has borrowed over time

direct tax

tax on income and wealth

indirect tax

tax on expenditure

progressive tax

tax the takes a larger percentage of the income or wealth form the rich

proportional tax

tax that takes the same percentage of the income or wealth from all tax payers

regressive tax

tax that takes a larger percentage of the income or wealth from the poor

automatic stabilisers

form of government expenditure and taxation, that reduces the fluctuations in an economy without changing the government policy

inflation

a raise in the price of goods and services over time

informal economy

the part of an economy that is not regulated, protected, or taxes by the government

flat tax

taxes with a single rate

fiscal policy

decisions on government spending and taxation designed to influence aggregate demand

expansionary fiscal policy

rise in the government expenditure and/or cuts in taxation designed to increase aggregate demand

contractionary fiscal policy

cuts in government expenditure and/or rises in taxation designed to reduce aggregate demand