Fiscal Policy

Types of Fiscal Policy

3 Types of Fiscal Policy

There are three types of fiscal policy; neutral, expansionary, and contractionary.
A neutral policy refers to a balanced budget. In other words, government brings in enough taxation to pay for its expenditures.
Expansionary fiscal policy is where government spends more than it takes in through taxes.
Contractionary fiscal policy is where government collects more in taxes than it spends.

calculator and pen showing a budget deficit

Budget Deficit Definition

A budget deficit is where we spend more than we receive. If our monthly salary is $1,000, but we spend $1,100; our budget deficit is $100. This is because we are spending $100 more than we receive from our salary. Budgets deficits apply to any person or entity.

Budget Surplus Definition

Budget Surplus Definition

A budget surplus is where government brings in more money than it spends. In other words, it receives more in taxes than it spends on defence, welfare, or education.

What is expansionary fiscal policy

What is Expansionary Fiscal Policy

Expansionary fiscal policy refers to a policy that seeks to grow the economy through fiscal stimulus. Governments do so by using two main methods. The first is lower taxation, and the second is an increase in government spending.

What is a trade deficit

What is a Trade Deficit

A trade deficit occurs when a nation imports more goods than it exports. In other words, a nation buys more from other countries, than it sells to other countries.

What is Fiscal Policy

Fiscal Policy Definition

Fiscal policy refers to governments spending and taxation. So how much income it has coming in through taxes, and how much it has going out through spending such as welfare, defence, and education.

Subsidies Definition

Subsidies Definition

Subsidies are a way by which governments give money to private firms, usually to keep prices low, or, to protect the firm and jobs. This can come through a cash payment, or a specific tax cut.