OCR Economics Fiscal Policy Revision Notes
Master OCR 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 is a crucial tool for managing economic performance, aiming to achieve objectives such as economic growth, low unemployment, 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 aims to reduce government spending or increase taxes.
- 4Fiscal policy can affect aggregate demand and influence economic growth.
- 5The effectiveness of fiscal policy can be influenced by factors such as the state of the economy and consumer confidence.
Simple Explanation
Fiscal policy is how the government uses its money to help the economy. When the government spends more or cuts taxes, it can boost the economy, which is called expansionary policy. On the other hand, if the government spends less or raises taxes, it can slow down the economy, known as contractionary policy. This helps control inflation and manage economic growth.
Memory Trick
“Remember 'FISCAL' as 'Funds In Spending, Cutting And Levies' to recall the main actions of fiscal policy.”
Flashcards
What is fiscal policy?
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Exam Questions
Describe and explain the impact of fiscal policy on economic growth. [6 marks]
6 marksView mark scheme hint▾
Discuss both expansionary and contractionary policies, their effects on aggregate demand, and potential outcomes for growth.
Explain how government spending can influence unemployment. [4 marks]
4 marksView mark scheme hint▾
Outline the relationship between government spending, job creation, and unemployment rates.
What is meant by contractionary fiscal policy? [2 marks]
2 marksView mark scheme hint▾
Define contractionary fiscal policy and provide an example.
Practice Quiz
What is the primary goal of expansionary fiscal policy?
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