Global Economy: Fiscal Policy and Government Debt

The government's accumulated debt, representing the total amount it owes to lenders.

The difference between government spending and tax revenue in a given period.

Government policies that are deliberately adjusted in response to economic changes.

Government policies that automatically adjust to economic conditions, without requiring specific action.

Projects undertaken by the government to create jobs and stimulate the economy.

The budget that reflects actual government spending and income.

The budget that assumes the economy operates at full potential.

The difference between the actual budget and the structural budget.

The difference between government spending and revenue when the economy is at its potential output.

The difference between government spending and revenue due to fluctuations in the business cycle.

The difference between government spending and revenue at the current economic conditions.

A policy that aims to reduce the budget deficit by raising taxes or cutting government spending.

A permanent decrease in taxes that leads to a reduction in government revenue.

A policy that aims to stimulate economic growth by increasing government spending or cutting taxes.

A policy that aims to reduce the money supply and increase interest rates to control inflation.

The amount of goods and services an economy can produce when all resources are fully employed.

A period of economic downturn characterized by a decline in economic activity, increased unemployment, and a decrease in consumer spending.

The rapid increase in the price of oil during the 1970s, leading to economic instability in many countries.

A situation where a country owes a large amount of money to other countries or organizations.

A government's strategy to increase economic growth by focusing on exporting goods and services.

A rapid decline in the value of a country's currency, often leading to economic instability.

A situation where a country relies heavily on borrowed money to finance its budget, making it more vulnerable to economic shocks.

The sudden and severe impact of a financial crisis in one country on other countries, especially those in the same region.

The International Monetary Fund (IMF), a global organization that aims to promote international monetary cooperation and financial stability.

Greece's government spending accounted for half of its total economic output (GDP) in 2009. Most of this spending went to public sector salaries and social welfare programs.

When investors have doubts about a country's ability to repay its debts, they demand higher interest rates on loans. This is because they want to be compensated for taking on the risk of the country potentially defaulting.

The global financial crisis of 2008-2009 significantly impacted Greece's financial situation. Unemployment benefits increased, tax revenue declined, and the government's debt burden grew.

An austerity program is a set of measures taken by a government to reduce its budget deficit. These measures typically involve spending cuts and tax increases.

In 2010, Greece received a €110 billion bailout package from the Eurozone countries and the International Monetary Fund (IMF) to help it manage its debt crisis.

Greece's debt-to-GDP ratio rose from 106% in 2006 to 126% in 2009. This signifies a significant increase in the amount of debt Greece owed relative to its total economic output.

Greece's budget deficit in 2009 was initially estimated at 6.7% of GDP. However, the government revised this estimate upward to 12.7% of GDP.

The Greek government's budget deficit was targeted for a reduction of 11 percentage points by 2013. This reduction was a key goal of the austerity program.

The idea that the timing of government taxation doesn't significantly impact the overall economic outcome. Government can either tax now or borrow money now and tax later to pay back the debt without affecting the economy's long-term health.

A situation where a country's saving rate isn't high enough to fund the investment needed for economic growth. This gap can be filled by borrowing money from other countries.

A situation where a country needs to import more goods than it exports to support its economic development. This means they need foreign currency to buy the required equipment and expertise.

The increase in the budget deficit due to an economic downturn. This happens because the government's spending on things like unemployment benefits goes up, while tax revenues fall.

The act of stimulating the economy by reducing taxes or increasing government spending. This increases the national debt but can lead to faster economic growth in the short term.

The money that a country owes to other countries. This debt can be accumulated through borrowing to fund government spending, development projects, or other needs.

The 1998 Russian financial crisis, also known as the Rubble crisis, began on July 17th, 1998. It was triggered by a combination of factors, including the Asian financial crisis of the previous year and a decrease in the price of raw materials like oil, metals, and natural gas, which constituted 80% of Russian exports. Crucially, the non-payment of taxes by the Russian state to the energy sector exacerbated the situation, leading to massive currency depreciation, productivity decline, and a chronic fiscal deficit.

The 1998 Russian financial crisis saw a dramatic decline in the value of the Ruble, causing a surge in inflation and economic instability. The crisis was so severe that the International Monetary Fund (IMF) and the World Bank intervened by providing a significant financial package of $22.6 billion USD to help stabilize the Russian economy.

The Argentine economic crisis of 1999-2002 was characterized by a prolonged period of economic recession, accompanied by high unemployment and poverty rates. This economic downturn stemmed from a sustained period of political and economic instability dating back to the military dictatorship of 1976-1983, exacerbated by events like the Falkland War in 1982 and the hyperinflation of 1989.

The Argentine economic crisis of 1999-2002 was further aggravated when the International Monetary Fund (IMF) refused to issue a loan of $1.3 billion USD, triggering protests. This refusal highlighted a disconnect between the Argentine government and the IMF over the effectiveness of IMF policies and the accuracy of their economic reports.

While the Argentine economic crisis presented significant challenges, the country managed to resolve its debt to the IMF by 2006. However, this required Argentina to borrow from its own Central Bank at significantly higher interest rates (9%) compared to the IMF's rates. This strategy suggests that Argentina may have opted for a short-term solution with higher costs.

Prior to 1990, the Greek government exerted significant control over the country’s economy, holding a 75% stake in business assets and regulating key sectors. By 2008, the state's ownership had decreased to around 50%, indicating a shift towards a more privatized economy.

The Greek financial crisis that began in 2009-2011 was driven by several factors, including excessive government spending, a large budget deficit, and a high level of public debt. Greece's inability to repay its debts triggered a financial crisis, prompting intervention from international organizations like the IMF.

The Greek financial crisis led to a series of bailout packages from international organizations like the IMF and the European Union. These bailouts aimed to stabilize the Greek economy and prevent a wider financial collapse in the eurozone. However, these bailouts were accompanied by strict austerity measures that imposed significant hardship on the Greek people.