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Introduction to Fiscal Policy definitions

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  • Fiscal Policy
    Government decisions on spending and taxes, directly influencing national economic activity and stability.
  • Monetary Policy
    Central bank actions affecting money supply and interest rates, separate from government spending and taxation.
  • Government Spending
    Expenditures by the national government, forming a key component of GDP and impacting economic growth.
  • Taxes
    Mandatory payments to the government, reducing disposable income and affecting household consumption.
  • GDP
    Total value of goods and services produced, calculated using consumption, investment, government spending, and net exports.
  • Disposable Income
    Money available to households after taxes, used for consumption or saving, crucial for economic activity.
  • Consumption
    Spending by households on goods and services, influenced by disposable income and a major part of GDP.
  • Investment
    Expenditures on capital goods, contributing to GDP alongside consumption, government spending, and net exports.
  • Discretionary Fiscal Policy
    Proactive government measures, such as changing spending or taxes, to influence economic conditions.
  • Automatic Stabilizers
    Mechanisms adjusting government spending and taxes automatically with the business cycle, moderating economic fluctuations.
  • Business Cycle
    Recurring phases of economic expansion and contraction, affecting income, employment, and government fiscal responses.
  • Aggregate Demand
    Total demand for goods and services in the economy, influenced by government spending, taxes, and disposable income.
  • Unemployment Insurance
    Government payments to the jobless, increasing spending during recessions and decreasing during economic booms.
  • Recession
    Period of economic decline marked by falling GDP, rising unemployment, and increased government support.
  • Economic Boom
    Phase of rapid economic growth, rising income, and reduced government support for unemployment.