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Week 5 Fiscal Policy Eco/372

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Week five Fiscal Policy Paper

* Depending on the time, the economy can have many financial stages. There are times when the economy is facing a budget deficit, which means the tax revenues in the government are lower than the government expenditures. The economy can also experience a surplus and high debt, which can also drain an economy. The state of our government can affect people from taxpayers, to the elderly who are collecting social security, to children needing medical and governmental benefits for their well-being. The government debt situation can be either an advantage to the population by lowering taxes, or a disadvantage by making taxes higher. * To know how taxpayers, future Social Security and Medicare users, and unemployed individuals are affected by the U S.’s deficit, surplus, and debt. It is important to understand the definitions of deficit, surplus and debt. Surplus occurs when there is more supply than demand, as in extra resources. Deficits occur when a government's expenditures exceed the revenue that it generates. Debt is an amount owed to another person or government in economics. * Taxpayers can benefit from a budget surplus. A surplus can create a reduction in the tax rate which leads to a higher consumer’s savings rate. The less taxes that consumers have to pay allows spending or savings in other areas. An increase in national savings (reduction in tax rate) also creates additional money that can be available for banks to lend. The more money banks have to lend competitively, consumers purchase items at lower interest rates and support stimulation in the economy. * Deficits can cause a cloud over the taxpayers. The bills need to be paid, and it will fall on the taxpayer to assist in lowering the debts. Armed with the idea that taxes will be raised to pay down debts is not a comforting thought. Wondering…...

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