Introduction to Fiscal Policy

A subsidy is money given to an individual or organization by the government. Government subsidies are often given to businesses to try to bolster sectors of the economy considered especially important.

A financial system is a network of organizations that enable financial transactions. Financial systems are made up of, among other institutions, banks, insurance companies, and stock brokerages. While there is a global financial system, there are also many national and regional financial systems that interact with and overlap with each other and the world financial system.

The Smoot-Hawley Tariff Act, the colloquial name for the United States Tariff Act of 1930, raised U.S. tariffs on many goods by 20%. This tariff, passed after the onset of the Great Depression, provoked retaliatory tariffs from many other countries. This trade war likely resulted in economic damage, but the amount is disputed.

Implementation lag refers to the length of time between when an economic event, like a recession, begins, and when government interventions to deal with it are put in place. As such, governments need to try and take this lag into account or their interventions may be tailored to situations that are now passed.

The works progress administration was a fiscal stimulus program created in 1935 as part of the New Deal to combat the Great Depression. It sought to lower the unemployment rate by directly hiring people to do various kinds of work, such as building infrastructure projects.