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Lecture 8

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ECON 1010
Xueda Song

Lecture Eight Fiscal PolicyMarch 13 2012Background to Fiscal PolicyIn 2007 the federal government spent 15 cents of each dollar Canadians earned and collected 16 cents of each dollar earned in taxesTherefore the government had planned a surplus of 1 cent on every dollar earnedHow does this planned surplus affect the economyFor many years the federal government had a large deficit and ran up debtWhat are the effects of an ongoing government deficit and accumulating debtGovernment BudgetsFederal BudgetsThe federal budget is the annual statement of the federal governments outlays and tax revenuesThe federal budget has two purposes1To finance the activities of the federal government2To achieve macroeconomic objectivesFiscal policy is the use of the federal budget to achieve macroeconomic objectives such as full employment sustained economic growth and price level stability BudgetMakingThe federal government and Parliament make fiscal policyAfter a long and drawn out process of consultations the Minister of Finance presents a budget plan to Parliament
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