Mercantilism is the economic theory that relates the wealth of a society and a government to precious metal stock of the country. Since getting strong and gaining reputation for a government depend on the surplus of precious metals, economic development is only possible by having low level of import and high level of export. This is the only way to increase precious metal stock that a country has.

Consumption (C), saving (S) and import (IM).

Autonomous tax is the part of total taxes that is independent of income.

The most important revenue item of government is income tax and it solely depends on the level of income.

Yd = C + S + IM

Disposable income = Consumption + Saving + Import

Disposable income is used in three different ways with the assumption that the taxes are autonomous, in other words, they are determined independently from income: Consumption (C), saving (S) and import (IM). 

Public expenditure, includes all expenditures of public institutions and organizations out of budget system, as well as the expenditures within the government budget. Public expenditures in broad sense are also called as economic public expenditures.

After the Great Depression started in 1929, significant
increases in public expenditures were observed worldwide. And, these increases have come until today.

Transfer expenditures are the unreturned (outright) expenditures and
have no direct effect on the national income. They only cause purchasing power to shift among private individual or social stratums. These shifts are performed unreturned, and there are no changes
on the flow of goods and services within national economy.

1. Economic Transfers

2. Financial Transfers

3.  Social Transfers

4. Debt Payments

Transfers made by the government in order to support the investments of Public Economic Enterprises.

Taxes are monetary amounts which the government and public institutions having taxation authority take outrightly from natural and legal persons in order to cover the public expenses based on sovereign
rights and laws.

The state’s use of public expenditures and taxes in order to affect the macroeconomic variables such as employment, income and prices is called as fiscal policy.

If government reduces its expenditures, the decrease in income will be greater than the reduction in government expenditures.

The multiplier effect created by any change in taxes can be named as tax multiplier. It is the coefficient that determines the effect of a change in taxes on the level of income.

Balanced budget multiplier is the net multiplier with a value of 1 when
government expenditures and taxes change in the same amount and direction.

After 1970s, as a result of an economic environment in which high inflation and high unemployment rates occurred at the same time together with slowing down economic growth throughout the world
economy, fiscal policy lost its popularity on a large scale.

Expansionary fiscal policy is the fiscal policy that aims to raise aggregate expenditures by increasing government spending and/or reducing taxes.

Sometimes, an economy may experience instabilities because of excess
aggregate spending, as well. Just as when the demand of a good is more than its supply, the price of that good increases; in case of aggregate spending overcomes the value of realized production, general
price level also starts to rise from macroeconomic point of view. We name this kind of economic environment as inflationary gap.

According to the Keynesian model, the reason of inflation is the excess of aggregate spending. So, trying to buy more goods and services than the economy can produce causes inflation.

Contractionary fiscal policy is the fiscal policy that aims to decrease
aggregate expenditures by reducing government spending and/or increasing taxes.

Automatic stabilizers are the revenue and expenditure items in the government budget that automatically change to provide stability in the economy.