12/13: Definitions

Question 1

Balanced Budget

Answer 1

Achieved when government expenditure equals government revenue.

Question 2

Bank of England

Answer 2

Central bank in UK economy, in control of monetary policy

Question 3

Budget Deficit

Answer 3

Achieved when government expenditure exceeds government revenue

Question 4

Budget Surplus

Answer 4

Achieved when government expenditure deceeds government revenue

Question 5

Central Bank

Answer 5

Controls the banking system and manage the government’s monetary policies.

Question 6

Contractionary fiscal policy

Answer 6

Fiscal policy implemented to decrease aggregate demand.

Question 7

Contractionary monetary policy

Answer 7

Monetary policy implemented to decrease aggregate demand.

Question 8

Crowding out

Answer 8

When an increase in government spending displaces private spending with little to no increase in aggregate demand.

Question 9

Cyclical budget deficit

Answer 9

Part of the budget that tends to rise in economic slumps and fall in economic booms.

Question 10

Deficit financing

Answer 10

Borrowing to finance a budget deficit.

Question 11

Deindustrialisation

Answer 11

Decline in the manufacturing industry of an economy.

Question 12

Deregulation

Answer 12

Removing regulations

Question 13

Direct tax

Answer 13

A tax on income and wealth.

Question 14

Equation of exchange

Answer 14

The stock of money in an economy multiplied by the velocity of circulation equals the price level multiplied by real output. (MV=PQ)

Question 15

Expansionary fiscal policy

Answer 15

This school policy implemented to increase aggregate demand.

Question 16

Expansionary monetary policy

Answer 16

Monetary policy implemented to increase aggregate demand.

Question 17

Fiscal Policy

Answer 17

Use of government spending and taxation to achieve macroeconomic objectives.

Question 18

Indirect Tax

Answer 18

A tax on expenditure.

Question 19

Interventionist Policies

Answer 19

Occurs when the government intervenes in, and sometimes replaces, free markets.

Question 20

Marketisation

Answer 20

Shifting the provision of goods or services from the non-market sector to the market sector.

Question 21

Monetary Policy

Answer 21

Use of interest rates and other monetary instruments to achieve macroeconomic objectives.

Question 22

Monetary Policy Committee

Answer 22

9 economists who meet monthly to set the bank rate as well as other monetary instruments.

Question 23

Money Supply

Answer 23

Stock of money in the economy, compromised of cash and bank deposits.

Question 24

National debt

Answer 24

Unpaid government debt.

Question 25

Natural rate of unemployment

Answer 25

Unemployment rate when the aggregate labour market is an equilibrium.

Question 26

Principal of taxation (Canon of taxation)

Answer 26

Criterion used to judge whether a tax is good or bad.

Question 27

Privatisation

Answer 27

Shifting the ownership of state-owned assets to the private sector.

Question 28

Progressive taxation

Answer 28

Taxes where a larger proportion of income is paid as income rises.

Question 29

Proportional taxation

Answer 29

Taxes were the same proportion of income as paid as income rises.

Question 30

Rate of interest

Answer 30

The reward for saving and the cost of borrowing.

Question 31

Reflationary Policies

Answer 31

Policies to increase aggregate demand, with intent to increase real output and unemployment.

Question 32

Regressive taxation

Answer 32

Taxes where a smaller proportion of income is paid as income rises.

Question 33

Reindustrialise

Answer 33

Growth in the manufacturing industry of an economy.

Question 34

Structural Budget Deficit

Answer 34

Part of the budget that is unaffected by the economic cycle and is more dependent on the decisions of the government.

Question 35

Supply side

Answer 35

Relate to the changes in potential output of the economy, which is affected by the factors of production.

Question 36

Supply side improvement

Answer 36

Reforms undertaken by the private sector to enable firms to become more productively efficient.

Question 37

Supply side policies

Answer 37

Use of interventionist policies to encourage efficient markets, thus achieving macroeconomic objectives.

Question 38

Tax threshold

Answer 38

The level above which income tax must be paid.