This chapter discusses fiscal policy and institutions, beginning with a focus on the Maastricht Treaty, and goes on to explain fiscal balance, with a discussion of aging populations and unemployment. The Great Recession of 2008 is mentioned for its effects on world revenues and government income. Professor Larraín discusses the issues of public spending and revenue and the national budget, which is the summary of all expenditures and an estimation of the revenues that a government has within a year. He talks about direct and indirect taxes, the source of revenue for the government, how countries collect taxes, and concludes with focus on current and capital expenditures of the government.

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