Macroeconomics

Table of Contents

1. Topic pack - Macroeconomics - introduction
2. 2.1 The level of overall economic activity (notes)
3. 2.1 The level of overall economic activity (questions)
4. Section 2.2 Aggregate demand and supply (notes)
5. Section 2.2 Aggregate demand and supply (simulations and activities)
6. 2.2 Aggregate Demand and Aggregate Supply (questions)
7. 2.3 Macroeconomic objectives (notes)
8. Low Unemployment
9. 2.3 Macroeconomic objectives (questions)
10. 2.4 Fiscal policy (notes)
    1. Fiscal policy - introduction
    2. The government budget
    3. Types of government expenditure
    4. A Case study: Government spending in the UK
    5. The budget outcome
    6. Fiscal policy and short-term demand management
    7. Impact of automatic stabilisers
    8. Fiscal policy and its impact on potential output
    9. Evaluation of fiscal policy
    10. The multiplier effect & fiscal policy
    11. Accelerator
    12. Crowding out
11. 2.4 Fiscal policy (questions)
12. 2.5 Monetary policy (notes)
13. 2.5 Monetary Policy (questions)
14. Section 2.6 Supply-side policies (notes)
15. 2.6 Supply-side policies (questions)
16. Print View

Sources of government revenue

Syllabus: Explain that the government earns revenue primarily from taxes (direct and indirect), as well as from the sale of goods and services and the sale of state-owned (government owned) enterprises.

In order to provide all the goods and services governments are expected to provide they need funding. Whether this is directly providing health, education, security (eg police, army, fire department etc) or subsidising merit goods (solar energy, pharmaceuticals, research and development, The Arts etc) they need to raise (collect) revenue.

Taxes

Tax systems include direct taxes (income tax, profit tax, capital gains etc) and indirect taxes (sales taxes - VAT, GST; excise taxes -  tobacco, alcohol, import)

Sale of Goods and Services

When governments own and run enterpises (usually utilities) they charge for the goods and services they sell (eg electricity, gas, clean water) and there are charges for non-utilities such as museums, national parks, toll roads etc)

The government budget is a statement that sets out all revenue streams coming into the government treasury departments and all the expenditures made by the government (or public sector, which includes municiple and local government as well as national government).

There can be a

budget deficit (expansionay on the economy because spending - injection- is greater than tax revenue - withdrawal).
budget surplus (contractionary on the economy because spending - injection- is less than tax revenue - withdrawal)
budget balance (no net effect on the economy because spending - injection- is equal to tax revenue - withdrawal)

below is a look at the government budget in the UK as an example of the concepts explained above:

The government budget

Sources of government income

Source: From 2011 UK Budget http://www.hm-treasury.gov.uk/d/junebudget_complete.pdf