Gov. spending PDF

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Government spending   

federal state local

spending fiscal policy tax spend government purchases — buying something that is produced by private sector transfer payments — payment from public sector to an individual that is not in return for a currently produced good or service. public sector gets nothing in return social security is funded through its own tax. single largest transfer payment

taxes sales & excise sales tax — apart of the price average tax rate = tax/income regressive tax — any tax where income goes up, % of income you pay in tax goes down (ex. sales tax) proportional tax — income goes up, % remains constant progressive tax — income goes up, ATR goes up, higher % of income paid income tax — can be proportional. corporate tax property tax social tax — social security, retirement, medicare. desginaited use estate taxes capital gain — sell an asset more than you pay for it

fiscal policy government purchases — transfer payments — payment from public sector to individual that’s not for the purchase of good/service

discretionary fiscal policy — alter the economy. cannot deal with supplyshocks unemployment rises cause less is produced. economic contraction. inflation rises cause too much demand in economy. prices raised to compisate supplyshocks — sudden increase in a major productive input stagflation — high inflation & unemployment lag problem    

recognition lag policy lag expectations crowding out — increase in gov. borrowing causes decline in private spending

expenditure — taxes. 

tax level influenced by level of economic activity

deficit- measures what is borrowed in fiscal year debt - total amount owed E 1000 - - - - - - - - - - 1120 Tx 800 840 880 920 1020 1070 1120 ___________________ Def 200

policy expasionary ^G ^Tp vTx contractionary vG vTp ^Tx

GDP v

inflation v

unemployment ^

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