2) Economic Policy

Question 1

4 Key Macroeconomic Objectives

Answer 1

1) price stability 📈
2) low unemployment ⏬️
3) stable economic growth
4) balance of payments equilibrium - exchange rate 💶

Question 2

Gross Domestic Product

Answer 2

GDP is a measure of a country’s overall economic activity.
Monetary value of all goods and services produced within the country in a given period.

Question 3

Target rate of inflation as measured by Consumer Prices Index (CPI)

Answer 3

2% +- 1% either way

Question 4

Monetary Policy

Answer 4

Measures taken to control the supply of money 💵 in the economy (eg raising and lowering interest rates) to manage inflation.

Question 5

Bank Rate/ Base Rate

Answer 5

MPC (meet 8 times a year) of the Bank of England decides on the rate of interest that Bank of England will lend to banks and financial institutions.

Question 6

Fiscal Policy

Answer 6

The adjustment of levels of taxation and Public spending to achieve governments Macroeconomic objectives.

Question 7

EU comman law types?

Answer 7

Regulations - binding in their entirety in both what and how it is to be achieved, and

Directives - each member has discretion on how they go about achieving the directive
(eg, EU Mortgage Credit Directive (MCD))

Question 8

European System of Financial Supervision (ESFS)

Answer 8

European Systematic Risk Board (ESRB)
made up of the Chairs of:

European Banking Authority (EBA)
European Insurance and Occupational Pensions Authority (EIOPA)
European Securities and Markets Authority (ESMA)

Question 9

Post Brexit, which of the following is correct when EU changes or introduces a new regulation?

A) UK is legally required to adopt or implement the new or reformed EU regulation
B) UK is legally required to ignore the new or reformed EU regulation
C) UK should consider whether it adopts a new regulation or develops its own alternative approach. And in the case of reformed regulation, whether it wishes to amend the legislation it onshored before Brexit.

Answer 9

C

Question 10

Disinflation means:

A) prices are rising faster than previously,
B) prices are falling,
C) prices are staying the same,
D) prices are rising but slowly than previously

Answer 10

D

Question 11

Which UK and which EU body are responsible for monitoring the financial system for systematic risk and taking steps to reduce it?

Answer 11

Bank of England and European Systematic Risk Board

Question 12

What is a potential negative consequence of expanding economic growth to reduce unemployment?

Answer 12

Expanding the economy (reducing interest rates and taxation) increase the demand for goods and services, which is likely to result in a rise in inflation ⚖️