Fiscal Policy Archives

Fiscal Policy

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.

Excise Tax Definition

Excise Tax Definition

An excise tax is a tax that is levied on specific products, usually in order to create a socially optimal outcome. For instance, cigarettes, alcohol, and fuel are all examples that have an excise tax.

tariffs definition

Tariffs Definition

A tariff is an import tax on goods coming into a country. So when a good arrives at customs from sea, plane, or motor vehicle, an import tax is due based upon the current ‘schedule’.

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.

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.

Progressive Tax Definition

Progressive Tax Definition

A Progressive tax is where the rate of taxation increases as incomes rise. In other words, the higher the income, the higher the rate of taxation. For example, someone earning $20,000 a year may pay 10 percent in taxes, whilst someone else earning $80,000 will pay 30 percent.

Regressive Tax Definition

Regressive Tax Definition

A regressive tax is where the tax rate falls for those who are in higher income brackets. In other words, lower-income households face a higher tax rate – as a percentage of their income – than higher-income groups.