EC140 Chapter Notes - Chapter 22: Canadian Dollar, Consumption Function, Disposable And Discretionary Income
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EC140 Full Course Notes
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Chapter 22 - adding government and trade to the simple macro model: fiscal policy is the use of the governments tax and spending policies to achieve government objectives. Net tax revenues: the total tax revenue minus transfer payments, denoted by t, t = ty. Where t is net tax rate, the increase in net tax revenue generated when national income rises by one dollar. The budget balance: the difference between total government revenue and total government expenditure, when net revenues exceed purchases, the government has a budget surplus. It equals net tax revenue minus government purchases, t g. Uses excess revenue to buy back outstanding government debt: when purchases exceed net revenues, the government has a budget deficit. Must borrow the excess of spending over revenues by issuing government debt: when the two amounts are equal, the government has a balanced budget.
