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Introduction to Fiscal Policy definitions

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  • Fiscal Policy
    Government decisions on spending and taxes aimed at influencing economic activity and stabilizing the economy.
  • Monetary Policy
    Central bank actions involving money supply and interest rates, separate from government spending and taxation.
  • Government Spending
    Expenditures by the national government that directly contribute to GDP and can stimulate or restrain economic growth.
  • Taxes
    Compulsory payments to the government that reduce disposable income and influence consumption and savings.
  • Disposable Income
    Funds remaining after taxes, available for households to spend on consumption or save for future use.
  • Consumption
    Household spending on goods and services, a major component of GDP affected by changes in income and taxes.
  • GDP
    Total market value of all final goods and services produced within a country, including government spending.
  • Discretionary Fiscal Policy
    Proactive government measures, such as new laws, to alter spending or taxes in response to economic conditions.
  • Automatic Stabilizers
    Built-in fiscal mechanisms that adjust spending or taxes automatically with the business cycle, without new legislation.
  • Business Cycle
    Recurring phases of economic expansion and contraction that influence income, employment, and fiscal responses.
  • Unemployment Insurance
    Government payments to jobless individuals, increasing during recessions and decreasing during economic booms.
  • Aggregate Demand
    Total demand for goods and services in the economy, influenced by fiscal actions and automatic stabilizers.
  • Recession
    Period of economic decline marked by falling GDP, rising unemployment, and increased government support payments.
  • Economic Boom
    Phase of rapid economic growth with rising GDP, higher incomes, and reduced government support payments.