The Federal Budget in Australia. The three Federal Budget outcomes are budget surplus, budget deficit and balanced budget.

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The Federal Budget is an official document that details the Governments planned expenditure and revenue for the upcoming financial year. Fiscal policy is a macroeconomic policy that manipulates the Federal Budget. Fiscal Policy is implemented through the Commonwealth Government’s Budget to achieve economic objectives by influencing the level of economic activity.

Economic objectives include the lowering of unemployment (NAIRU), price stability, environmental and external stability, sustainable economic growth and equitable distribution of income. These objectives can be achieved through Fiscal Policy. Fiscal Policy is extremely important in stabilizing economic growth. Through either contractionary or expansionary stances, the government reduces the impact of dramatic booms or crashes. By contracting government expenditure in times of high economic growth, the economies activity slows. This ensures that the economy maintains a steady growth level, therefore maintaining a relatively low inflation rate of between 2-3%. The Government uses Fiscal Policy to stimulate the economy when needed in order to reduce cyclical unemployment. Also, funding retraining programs lowers structural unemployment.

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The three Federal Budget outcomes are budget surplus, budget deficit and balanced budget.

A budget surplus occurs when revenue collected exceeds government expenditure. This means that the government is taking more out of the economy through taxes and other methods of collecting revenue than it is putting in through expenditure. This has a contractionary effect on the economy, decreasing economic activity. This is as there is a negative multiplier effect, a greater than proportional decrease in the circular flow resulting from a leakage. Government debt will decrease.

A Budget deficit, the opposite of a budget surplus, is when ...

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