Please enable JavaScript.

Coggle requires JavaScript to display documents.

FISCAL POLICY - Coggle Diagram

- - - - What is the role of the government in fiscal policy?
        The government looks at the rate of inflation and implement changes in tax rate to either increase or decrease economic growth. They also change their spending to influence the spending of consumers.
        
        What is the impact of fiscal policy on the budget deficit and national debt?
        If the government increases its spending on goods and services, it can lead to a larger budget deficit. This is because the government will need to borrow more money to finance its spending. On the other hand, if the government reduces its spending, it can help to reduce the budget deficit.
        If the government reduces taxes, it can lead to a smaller budget surplus or a larger budget deficit. This is because the government will have less revenue to finance its spending. On the other hand, if the government increases taxes, it can help to reduce the budget deficit.
        The level of interest rates can have a significant impact on the cost of servicing the national debt. If interest rates are low, it can help to reduce the cost of servicing the debt. On the other hand, if interest rates are high, it can increase the cost of servicing the debt.
      - How does fiscal policy differ from monetary policy?
        Monetary policy addresses interest rates and the supply of money in circulation, and it is generally managed by a central bank. Fiscal policy addresses taxation and government spending, and it is generally determined by government legislation.
    - - What is the difference between automatic stabilizers and discretionary fiscal policy?
        Automatic stabilisers are automatic fiscal changes as the economy moves through different stages of the business cycle – such as a fall in tax revenues from the circular flow during a recession or an increase in state welfare benefits when the unemployment rate is rising.
        Discretionary fiscal policies are intentional government policies to increase or decrease government spending or taxation. For example, Keynesian economists might favour a deliberate increase in the size of the fiscal deficit when private sector demand and confidence is low during an economic recession.