gov policies

what is budget

est of income and expenditure

budget formula

revenue - expenditure

balanced budget

revenue = expenditure

deficit budget

expenditure more than income (fight recession)

surplus budget

income more than expenditure (fight inflation)

fiscal policy defination

changes in gov spending (g) or taxes (t)

can be in a form of automatic stabilisers or discretionary fiscal policy

can be expansionary or contractionary

gov try to correct recession or inflationary situation

expansionary fp

increase g &/or decrease in t

results of expansionary fp

increase in ad

increase in output

increase in g

decrease taxes

or both

when to use expansionary fp

when the economy is in a recession