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Chapter 29

ECON 1010 Chapter 29: Chapter 29 Notes


Department
Economics
Course Code
ECON 1010
Professor
Steven Edwards
Chapter
29

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Chapter 29
Federal budget the annual statement of the outlays and revenues
Fiscal Policy is use of federal budget to achieve full employment, sustain economic growth,
ensure price stability
Revenues
These revenues come from 4 sources:
- Personal income taxes
- Corporate income taxes
- Indirect taxes and other taxes
- Investment income
Outlays
- Government expenditure
- Transfer payments
- Debt interest
Budget Balance = Revenues Outlays
Budget surplus when revenue exceeds outlays
Budget deficit when outlays exceeds revenues
Balanced budget when revenue equals outlays
Government debt the sum of government past government deficits minus government
surplus
The Effects of Income taxes
- Income taxes weaken the incentive to work so labour supply decreases
- Shifts the LS curve left to LS + tax curve
- The distance between the before tax wage rate and the after tax wage rate is called the
tax wedge
- Income tax has no effect on labour demand since real wage rate is what firms care
about
- A tax cut would increase the supply of labour, increase employment equilibrium, and
potential GDP
Taxes on Consumption
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