Government expenditure and tax revenue which change automatically as income changes are called Automatic Stabilizers. The deliberate manipulation of government expenditure and taxes to influence the economy is called Active Fiscal Policy.
In March 2006, The Chancellor of Exchequer announced a number of changes to tax and Government expenditure at a time when the economy was growing very slightly below its trend of growth. Explain whether the changes are likely to be the example of automatic stabilizers or active fiscal policy.
a. The introduction of new higher band of Vehicle Excise Duty (the tax on cars) of $210 for cars which have a very high petrol consumption per mile travelled.
b. A rise in tax revenue is 2005-2006 of 7.0 per cent, net of changes in tax rates in 2005 budget.
c. A rise in average spending per pupil in state sector schools from $5000 per annum to $8000 over the period of 2006 to 2012.
d. Lower receipts from excise duties and VAT partly caused by modernization of household spending.
Deadline of Submission: 17.01.2015.
In March 2006, The Chancellor of Exchequer announced a number of changes to tax and Government expenditure at a time when the economy was growing very slightly below its trend of growth. Explain whether the changes are likely to be the example of automatic stabilizers or active fiscal policy.
a. The introduction of new higher band of Vehicle Excise Duty (the tax on cars) of $210 for cars which have a very high petrol consumption per mile travelled.
b. A rise in tax revenue is 2005-2006 of 7.0 per cent, net of changes in tax rates in 2005 budget.
c. A rise in average spending per pupil in state sector schools from $5000 per annum to $8000 over the period of 2006 to 2012.
d. Lower receipts from excise duties and VAT partly caused by modernization of household spending.
Deadline of Submission: 17.01.2015.
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