Fiscal Policy

. Changes in the expenditures or tax revenues in the federal government
-2 tools of fiscal policy
Taxes and Spending

Deficits, Surplus, and Debts 

. Balanced Budget
. Revenues = Expenditures
Deficit Revenue<Expenditures
Budget Surplus Revenues.Expenditures
.Government Debt
Sum of deficits- sum of expenditures
Government must burrow money when they are in a budget deficit
. Government burrows from
-individuals
-corporations
-financial institutes
-other governments or foreign leaders

Fiscal Policy Options

.Discretionary fiscal policy (action)
Non-Discretionary fiscal policy (no action)
Expansionary Fiscal Policy
. combat recession
. increase government spending
.decrease taxes


Contractionary Fiscal Policy
.combat inflation
.decrease government spending
.increase taxes