National debt: a weighty term often tossed around in economic news. But fear not! It simply refers to the money a government owes its creditors. This debt accumulates when a government spends more than it collects in tax revenue, resulting in a
Economic Context
Discretionary Fiscal Policy: The Government’s Tool to Steer the Economy – Types, Effects
Discretionary fiscal policy isn't about autopilot. It's a deliberate strategy governments use to influence the economy's direction. By adjusting spending and taxation, policymakers aim to achieve a stable economic climate, promoting growth and
Induced Tax: The Automatic Stabilizer You Didn’t Know About – Examples, Impacts
An induced tax automatically adjusts its bite based on the health of the economy. Unlike fixed taxes, induced taxes take a bigger chunk out of your income during economic booms and a smaller cut during downturns. This built-in flexibility makes
Balanced Budget: Pros and Cons (Debt, Growth, Multiplier Effect)
What's it: A balanced budget is when a government's spending equals its revenue. Therefore, there is no surplus or deficit. So, the government does not need to borrow to cover its expenses. So, there is no government increase. However, achieving
Budget Surplus: Effects on Debt, Economic Growth and Investment
What's it: A budget surplus is when the government plans to spend less than it earns. In other words, the government's budgeted revenue is greater than the government's spending. Surpluses may be an option when the economy is prospering, where
Taxes: Types, Impact on Economy (Growth, Jobs, Prices)
What's it: A tax is a mandatory levy by the government on an individual or other entity. There are many variations, including income tax, value-added tax, and capital gains tax. It has become the main source to cover government spending in
Government Budget: Balancing Revenue, Spending and Fiscal Policy – Components, Impacts
A government budget is a blueprint for a nation's financial health. It outlines how much money the government expects to collect (revenue) and how much it plans to spend over a specific period, usually one year. This knowledge sheds light on how
Inflation Rate: Calculations, Types, Impacts and Solutions
What's it: The inflation rate is the percentage change in the economy's prices of goods and services over a certain period. While inflation tells us about a situation where the prices of goods and services increase or decrease, the inflation
Income Distribution: Understanding & Bridging the Gap (Measurement, Solutions)
What's it: Income distribution is about how the income or wealth of the economy is shared among its citizens. It is fair when income is evenly distributed to all people who really need it and are on target. Thus, there is no sharp disparity between
Possible Conflicts Between Macroeconomic Goals
Conflicts between macroeconomic goals occur because governments cannot pursue all goals at once. There is a trade-off between these goals. Choosing one goal requires the government to forego or not achieve other goals. Thus, the government must
The Government’s Role in the Macroeconomic Sector: Policies, Functions, and Impact
The government sector is one of four economic sectors, along with the household sector, the business sector, and the external sector. Unlike business, the government sector is not profit-oriented but rather provides services for the general welfare.
Understanding the External Sector: Its Impact on Macroeconomic Performance
What’s it: The external sector refers to economic actors located outside the country. They include foreign households, foreign businesses, and foreign governments. They interact with the domestic economy through international trade. They buy