What is the fiscal cliff bill?

The United States fiscal cliff refers to the combined effect of several previously-enacted laws that came into effect simultaneously in January 2013, increasing taxes and decreasing spending.

What happens in a fiscal cliff?

The fiscal cliff refers to a combination of expiring tax cuts and across-the-board government spending cuts that create a looming imbalance in the federal budget and must be corrected to avert a crisis.

What is fiscal cliff in simple terms?

A fiscal cliff is a situation in which sudden changes in government spending and tax have a big and sudden effect on a country’s economy. The country is fast approaching the fiscal cliff.

What are three impacts of the fiscal cliff on our economy?

Impact If the Country Had Fallen off the Cliff If the fiscal cliff had occurred, it would have thrown the economy into recession. Two-thirds of the $607 billion projected loss due to the following tax increases. Expiration of Bush and ARRA tax cuts – $229 billion. Expiration of payroll tax holiday – $95 billion.

Is a fiscal year?

A fiscal year is a one-year period that companies and governments use for financial reporting and budgeting. Although a fiscal year can start on January 1st and end on December 31st, not all fiscal years correspond with the calendar year.

What is the difference between fiscal and monetary policy?

Monetary policy addresses interest rates and the supply of money in circulation, and it is generally managed by a central bank. Fiscal policy addresses taxation and government spending, and it is generally determined by government legislation.

What is meant by fiscal drag?

Fiscal drag is an economic term whereby inflation or income growth moves taxpayers into higher tax brackets. The increase in taxes reduces aggregate demand and consumer spending from taxpayers as a larger share of their income now goes to taxes, which leads to deflationary policies, or drag, on the economy.

What is the difference between fiscal year and calendar year?

Calendar year – 12 consecutive months beginning January 1 and ending December 31. Fiscal year – 12 consecutive months ending on the last day of any month except December.

What causes a fiscal drag?

Fiscal drag happens when the government’s net fiscal position (spending minus taxation) fails to cover the net savings desires of the private economy, also called the private economy’s spending gap (earnings minus spending and private investment).