Unit III Fiscal Policy

Unit III Fiscal Policy

Changes in the expenditures or tax revenues of the federal government.

• 2 tools of Fiscal Policy
  -Taxes - government can increase order or decrease taxes
  -Spending - Government can increase or decrease spending

Unit III (Deficits, Surpluses, and Debt)

• Balanced Budget
  -Revenues = Expenditures
• Budget Deficit
  -Revenues < Expenditures
• Budget Surplus
  -Revenues > Expenditures
• Government Debt
  -Sum of all deficits - Sum of all Surpluses
• Government must borrow money when it runs a budget deficit. They borrow from:
  -Individuals
  -Corporations
  -Financial Institutions
  -Foreign Entities or Foreign Governments

• Fiscal Policy (Two Options)

• Discretionary Fiscal Policy (action)

-Expansionary fiscal policy - think deficit

• Contractionary fiscal policy - think surplus