Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define fiscal policy and name its tools: government spending, taxes and transfer payments. (Guide: “What fiscal policy is”; Practice Q1)
- I can tell fiscal policy apart from monetary policy. (Guide: “What fiscal policy is”; Practice Q1, Q6(b))
- I can explain why government spending changes AD directly, while taxes and transfers change it indirectly through disposable income. (Guide: “Direct and indirect effects on AD”; Practice Q3)
- I can explain why the spending multiplier is larger than the tax multiplier. (Guide: “Direct and indirect effects on AD”; Practice Q3, Q5(d))
Calculation
- I can calculate the change in government spending needed to close a recessionary or inflationary gap. (Guide: Worked examples 1 and 2; Practice Q2, Q5(c), Q7(a))
- I can calculate the change in taxes or transfers needed to close a gap, and state its direction. (Guide: Worked examples 1 and 2; Practice Q5(d)–(e), Q7(b))
- I can combine a spending change and a tax change to close a gap. (Guide: Worked example 2(d); Practice Q7(c))
Reasoning and graphs
- I can choose expansionary or contractionary policy for a given gap and state its short-run effects on real GDP, the price level and unemployment. (Guide: “Matching the policy to the gap”; Practice Q5(a), Q6)
- I can show the short-run effect of fiscal policy on a correctly labelled AD–AS graph. (Guide: Figure 1; Practice Q6)
- I can explain why real GDP may rise by less than the shift in AD when SRAS slopes upward. (Guide: “Calculating the change needed to close a gap”, Assumption; Practice Q7(e))
- I can explain the lags in discretionary fiscal policy and how bad timing can make fluctuations worse. (Guide: “Lags in discretionary fiscal policy”; Practice Q4, Q6(e))
All ticked? Move on to the automatic stabilizers study guide, or return to the course roadmap.