Budget Process

• Budget

  The tool of the government for the implementation of fiscal policy. Government expenditure and taxation effect the level of aggregate demand
• Expansionary Fiscal Policy

  Government may reduce taxation or increase government expenditure aiming to increase economic activity levels by stimulating aggregate demand
• Contractionary Fiscal Policy

  Increase taxation or decrease in government expenditure aiming to decrease economic activity levels by dampening aggregate demand
• Neutral Fiscal Policy


  Does not change budget outcome, therefore budget should have no effect on aggregate demand or economic activity
• Automatic Stabilisers


  Instruments inherent in the government's budget that counterbalance economic activity