Demand Side Fiscal Policy

What were the figures for UK government borrowing for the 2025 - 2025 financial year?

£151.9 billion

What are the 2 categories of macroeconomic policies to improve the performance in meeting the 7 macroeconomic objectives?

• Demand side policies by changing AD

• Supply side policies

What is a supply side policy (not a crossover)?

changing laws/ regulations

How does changing laws affect AS?

To change government rules to affect AS

What is a policy that can apply to both demand side policies and supply side policies?

Fiscal policies

How does the fiscal policy apply to the supply side policies?

To change spending or taxation to affect AS

How does the fiscal policy apply to the demand side policies?

To change government spending or taxation to affect AD

What is the definition of a monetary policy?

Policy by the central bank which changes the cost/ amount of money in order to affect AD and improve economic performance in meeting the 7 objectives

What is the definition of demand side fiscal policy?

Policy by the government to affect AD and improve economic performance by either changing government spending and/ or taxation

What is the definition of supply side fiscal policy?

Policies by the government that affect AS and improve economic performance by either fiscal policy or changing laws/ regulations

What is the 1st of the four options for demand side fiscal policy?

Increase government spending

What is the 2nd of the four options for demand side fiscal policy?

Decrease government spending

What is the 3rd of the four options for demand side fiscal policy?

Increase direct Taxation rates

What is the 4th of the four options for demand side fiscal policy?

Decrease direct taxation rates

What are 2 examples of direct taxes you could increase for demand side fiscal policy?

Income tax and corporation tax

What does expansionary mean?

Increase in AD

What does contractionary mean?

Decrease in AD

Would an increase in Government spending be expansionary of contractionary?

Expansionary

Would an decrease in Government spending be expansionary of contractionary?

Contractionary

Would an increase in direct taxation rates be expansionary of contractionary?

Contraction

Would an decrease in direct taxation rates be expansionary of contractionary?

Expansion

How much did the UK government spend in 2024 - 2025?

£1031.2 billion

What percentage of government spending went to Education between 2024 - 2025?

£116 billion

What percentage of government spending went to Transport between 2024 - 2025?

£44 billion

What percentage of government spending went to Healthcare between 2024 - 2025?

£278 billion

What percentage of government spending went to Personal Social Services between 2024 - 2025?

£36 billion

What percentage of government spending went to Benefits between 2024 - 2025?

£285 billion

What percentage of welfare benefits were spent on state pension?

50%

What percentage of government spending went to Debt interest between 2024 - 2025?

£56 billion

What percentage of government spending went to public order and safety between 2024 - 2025?

£38 billion

What percentage of government spending went to housing and environment between 2024 - 2025?

£32 billion

What are the 2 types of taxes?

• Direct taxes

• Indirect taxes

What is the definition of a direct tax?

Taxes taken directly from earnings of households and firms

What is the definition of an indirect tax?

Taxes on goods and services - usually according to sales

What do direct taxes affect?

AD

What does a change in direct taxes cause a shift of?

AD (C or I depending on which tax is changed)

What does a change in indirect taxes cause a shift of?

SRAS (firms costs are affected)

What are excise duties?

Taxes on particular products like alcohol, tobacco and petrol

What is income tax?

A tax on income earnt through work

What are business rates?

A tax that firms pay to local governments, based on the values of there premises

What are premises?

Business buildings, offices or shops

What is council tax?

A tax that households pay to local governments based on the value of their home (owned or rented)

What are National insurance contributions?

A tax that contributes to a persons future entitlement to state pension, social care and unemployment benefits

What is corporation tax?

A tax on firms profit

What is VAT?

A tax that firms pay when consumers pay for their products

Are excise duties indirect or direct?

Indirect tax

Is income tax indirect or direct?

Direct tax

Are business rates indirect or direct?

Direct tax

Are national insurance contributions indirect or direct?

Direct tax

Is council tax indirect or direct?

Direct tax

Is corporation tax indirect or direct?

Direct tax

Is VAT indirect or direct?

Indirect tax

What was the total revenue for the UK government in 2020?

£879.3 billion

Would an increase in government spending lead to an increase or decrease in GDP?

Increase

Would a decrease in government spending lead to an increase or decrease in GDP?

Decrease

Would an increase in direct taxation rates lead to an increase or decrease in GDP?

Decrease

Would a decrease in direct taxation rates lead to an increase or decrease in GDP?

Increase

Would an increase in government spending lead to an increase or decrease in unemployment?

decrease

Would a decrease in government spending lead to an increase or decrease in unemployment?

Increase

Would an increase in direct taxation rates lead to an increase or decrease in unemployment?

increase

Would a decrease in direct taxation rates lead to an increase or decrease in unemployment?

Decrease

Would an increase in government spending lead to an increase or decrease in inflation?

Increase

Would a decrease in government spending lead to an increase or decrease in inflation?

Decrease

Would an increase in direct taxation rates lead to an increase or decrease in inflation?

decrease

Would a decrease in direct taxation rates lead to an increase or decrease in inflation?

increase