Fiscal policy aims to stabilize the economy by influencing aggregate demand through government spending and taxation.

Fiscal policy can affect income distribution through government spending, taxation, and its impact on economic activity.

Progressive taxation involves higher tax rates for higher income levels, aiming to redistribute income from the wealthy to the less wealthy.

The Laffer Curve illustrates the relationship between taxation and economic growth, suggesting that there is an optimal level of taxation that maximizes government revenue.

Expansionary fiscal policy involves increasing government spending and/or decreasing taxes to stimulate economic activity.

Redistributive fiscal policy aims to reduce income inequality by transferring income from the wealthy to the less wealthy through taxation and government spending.

Automatic stabilizers are fiscal policy measures that automatically respond to changes in the economy, such as unemployment benefits, which increase during economic downturns.

A budget deficit occurs when government spending exceeds government revenue, leading to a negative fiscal balance.

Regressive taxation involves lower tax rates for higher income levels, disproportionately benefiting the wealthy.

A budget surplus occurs when government revenue exceeds government spending, leading to a positive fiscal balance.

Discretionary fiscal policy involves government spending and taxation decisions that are subject to annual legislative approval, such as defense spending.

The fiscal multiplier measures the impact of a change in government spending or taxation on the overall level of economic activity.

A lump-sum tax is a fixed amount of tax that is levied on all individuals, regardless of their income or consumption.

The distributional impact of fiscal policy refers to the effect of government spending and taxation on the distribution of income among different income groups.

A proportional tax involves a constant tax rate for all income levels, resulting in a proportional relationship between income and tax liability.