Chapter 29 – FISCAL POLICY
The annual statement of the outlays and revenues of the government of Canada, together with the laws
and regulations that approve and support those outlays and revenues, make up the federal budget.
Provincial budget is an annual statement of the revenues and outlays of a provincial government.
Fiscal policy is the use of the federal budget to achieve macroeconomic objectives such as full
employment, sustained long term economic growth and price level stability.
Three main items in federal budget:
Revenues – receipts come from four sources: personal income tax, corporate income tax, indirect tax,
Outlays – transfer payments, expenditures on goods/services, debt interest.
Budget Balance = revenue – outlays.
If revenue exceed outlay, there is budget surplus
If outlays exceed revenue, there is budget deficit.
‘’’’ balanced budget
Government debt is the total amount of government borrowing. Deficits minus sum of past surpls.
Tax wedge is the gap created betwee