Fiscal Policy
Government use of taxation and spending to influence economy.
Formula
Budget Balance = Government Revenue (Tax) − Government Spending
Real World
During the 2020 pandemic, the UK government dramatically increased spending through the furlough scheme (£70bn+) while cutting VAT for hospitality — classic expansionary fiscal policy to support demand.
Exam Focus
Specify whether policy is expansionary or contractionary and link directly to its effect on business demand or costs.
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