Eco Sac 5

Aggregate demand policies

are policies which involve regulating AD in a counter-cyclical way.

Budgetary policy

is the manipulation of federal government receipts and outlays in order to assist in the achievement of its economic and social objectives for Australia.

Direct taxation:

are those levied on individuals and businesses that receive incomes

Indirect taxation:

are those added onto the price of a good or service at the point of sale

Progressive tax:

the proportion of tax paid increases as income rises.

Regressive taxes

are those where the proportion of income paid in tax increases as income falls.

Proportional taxes

on income are those where the rate of tax stays the same regardless of how much income is earned.

Government current expenditure (G1)

: payments for goods and services that are consumed in the current budget period and which result in no ongoing benefits into the future.

Government capital/investment expenditure (G2):

the purchase of capital assets that will have ongoing benefits into the future

Transfer payments

are government income payments to households and business that are not made in exchange for goods and services

the budget outcome:

balanced (budget outcome is zero)

The headline budget balance:

total value of government receipts minus government outlays.

the underlying cash balance (budget outcome):

it is derived from the original cash receipts and payments of the government but remove the effects of transactions that are either one-off or do not affect the budget balance in net terms over time.

Gross government (public) debt:

total amount of money the government owes (total value of government bonds outstanding)

Net government (public) debt:

total amount of money the government owes minus total amount of money owed to the government

Automatic stabilisers (cyclical component of the budget):

components of the budget that operate counter cyclically to the business cycle and do not involve deliberate government intervention

Discretionary stabilisers (structural component of the budget):

deliberate policy decisions designed to change receipts or outlays in an effort to influence economic activity

Expansionary

is when expenses rise relative to revenue

Contractionary

is when revenue rises relative to expenses

Impact lag

is the time taken for a policy

Implementation lag

is the time taken for a policy to be developed and enacted.