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Economics Sub-Topic A: Fiscal Policy Cheat Sheet (DRAFT) by

Govt income includes direct/indirect taxes, revenue from enterprises, and asset sales. Expenditure covers current, capital, and transfer payments. Automatic stabilisers adjust with the cycle, while discretionary spending actively manages demand—both shown via AD/AS diagrams. Recent budgets show expansionary policy during downturns, contractionary in booms. Fiscal policy aims to support growth, stability, and living standards.

This is a draft cheat sheet. It is a work in progress and is not finished yet.

Fiscal Policy

Fiscal policy is a macroe­conomic policy tool that involves the govern­ment's manipu­lation of the level, compos­ition, and allocation of its taxation revenue and expend­iture. It is primarily used to influence the national aggregate demand for goods and services.
Key Goals of Fiscal Policy:
• Influence the market allocation of resources (reallo­cation role).
 
• Influence the market distri­bution of income (redist­rib­ution role).
 
• Manage aggregate expend­iture (also known as the market stabil­isation role), which directly impacts aggregate demand.
Short-run (demand side) management policy, aimed at reducing the severity of swings in economic activity caused by the economic cycle. It helps promote a stable economic enviro­nment for consumers and producers to make confident decisions about resource alloca­tion.

The Visible Hand

If Economic Cycle gets into a downturn or bust the central bank (RBA) can make changes to correct or fix the economic cycle.

The Government Sector

Indirect Taxation: any tax on aspects of economic activity other than income. For example, the Goods and Services Tax (GST), carbon tax. These can be passed on to other by the firm on which the tax is levied.
Direct Taxation: any tax that is borne by the person or firm on who it is levied. For example income tax and company tax.
 
Types of Direct taxation:
 
1. Progre­ssive Tax: a tax system in which the percentage of tax payable increases as incomes rise.
 
2. Propor­tional Tax (flat rate tax): a tax system in which all pay a constant rate of taxation regardless of income level.
 
3. Regressive tax: a tax system in which the ratio of tax is lower with higher incomes than with smaller incomes.