AQA Economics Fiscal Policy Revision Notes
Master AQA Economics Fiscal Policy using simple revision notes, key facts and practice questions — all generated by AI for your exam.
Fiscal policy refers to the use of government spending and taxation to influence the economy. It aims to achieve macroeconomic objectives such as economic growth, full employment, and price stability.
Key Concepts
- 1Fiscal policy can be expansionary or contractionary.
- 2Expansionary fiscal policy involves increasing government spending or decreasing taxes.
- 3Contractionary fiscal policy involves decreasing government spending or increasing taxes.
- 4Fiscal policy can affect aggregate demand and overall economic activity.
- 5The effectiveness of fiscal policy can be influenced by factors such as the level of public debt and consumer confidence.
Simple Explanation
Fiscal policy is how the government uses its money to influence the economy. When the government spends more or cuts taxes, it can help boost economic activity, which is called expansionary policy. Conversely, if it cuts spending or raises taxes, it can slow down the economy, known as contractionary policy. The goal is to maintain a healthy economy with jobs and stable prices.
Memory Trick
“Think of 'FISCAL' as 'Funds In Spending Cuts And Loans' to remember that it involves managing funds through spending and taxation.”
Flashcards
What is fiscal policy?
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Exam Questions
Describe and explain the impact of expansionary fiscal policy on the economy. [6 marks]
6 marksView mark scheme hint▾
Discuss increased spending, tax cuts, effects on aggregate demand, and potential inflation.
Explain how contractionary fiscal policy can help reduce inflation. [4 marks]
4 marksView mark scheme hint▾
Mention decreased government spending and increased taxes leading to lower aggregate demand.
What is meant by a budget deficit? [2 marks]
2 marksView mark scheme hint▾
Define budget deficit and explain its implications for government borrowing.
Practice Quiz
What type of fiscal policy is used to combat inflation?
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