Fiscal policy

Expansionary and contractionary policy Deficit and Surpluses Built-in-stability

Fiscal policy-changes in the expenditures or tax revenues of the federal gov. 
- 2 tools:
- taxes- gov. can increase or decrease taxes
- spending- gov. can increase or decrease spreading
Fiscal policy is enacted to promote nations Economic goals:
Full employment
Price stability
Eco growth

Balance budget:
-revenues= expenditure
Balance deficit:
-revenues < expenditures
Budget surplus:
-revenues> expenditures 
Government debt:
-sum of all deficit-sum of all surpluses

Government can borrow from:
-individuals
-corp.
-financial instit.
-foreign entities

Discretional fiscal policy (action)
-expansionary fiscal policy (DEFICIT)
-contractionary fiscal policy (SURPLUS)
Non-discretionary fiscal policy (non action)

Discretionary:
-increasing or decreasing gov. spending and/or tax order to return the economy to full employment. 

Automatic:
-unemployment compensation and marginal tax rates are examples of automatic policies that help mitigate the effects of recession and inflation. 

Contractionary: policy that designed to decrease AD
-for controlling inflation

Expansionary F.P: policy designed to increase AD
-for increasing GDP, controlling recession, and reduce unemployment. 

Automatic or Built-in-Stabilizers
-anything that increases the gov. budget deficit during a recession and increases it's budget surplus during inflation without requiring help from policy makers 
-Progressive tax system
- average tax rate (tax revenue/ GDP) rises with GDP
-Proportional tax system
-average tax rate remains constant as GDP changes
-Regressive Tax system 
-average tax rate falls with GDP