A2 Revision – Fiscal Policy

With the exam season just about to start in New Zealand I thought it appropriate to do some revision blog posts. In the CIE A2 paper there is always a macro policy question and it usually focuses on the conflicts between the different objectives. Below is a mindmap on fiscal policy that might be useful. Fiscal Policy involves the use of Government Spending and Taxation in order to influence the level of economic activity. The Government receives money through Taxation (T) and spends money through Government spending (G).

• A budget deficit occurs when G > T
• A budget surplus occurs when T > G

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US debt default – what are the consequences?

If lawmakers fail to avert a debt default, there could be a devastating impact on the national economy: mortgages soaring, consumers unable to borrow, the government forced to pay more to borrow more, plunging us deeper into debt. PBS Economics correspondent Paul Solman reports on how the bond market is anticipating the situation. Features former IMF Chief Economist and now MIT Professor Simon Johnson.