25 Mark Bumhole

Question 1

Monetary policy

Answer 1

The manipulation of the price and availability of money within an economy to achieve economic policy objectives.

Question 2

Objectives of government economic policy

Answer 2

-Sustainable economic growth
-low income inequality and poverty
-price stability
-sustainable fiscal deficit and national debt
-stable current account
-low unemployment

Question 3

Economic growth

Answer 3

Increase in real gdp

Question 4

Real gdp

Answer 4

Real value of goods and services produced in an economy in a given period of time

Question 5

Fiscal deficit

Answer 5

When a government spends more than it receives in tax revenue in a given time period

Question 6

Current account

Answer 6

Part of the balance of payments that looks at the net income flows earned through either trade in goods and services or the reward from investments located overseas

Question 7

Current account deficit

Answer 7

where the flows of money from trade and other incomes out of the country are greater than the equivalent flows into the country.

Question 8

National debt

Answer 8

The stock of all outstanding government debt that has yet to be repaid.

Question 9

Fiscal policy

Answer 9

Fiscal policy involves deliberate changes in either government spending or taxation.

Question 10

Supply side policies

Answer 10

Deliberate actions taken by the government designed to increase the LRAS of the economy.

Question 11

Contractionary fiscal policy

Answer 11

Decreases the level of AD by decreasing:
-consumption
-investments
-government spending
Shifts the ad curve left

Question 12

Expansionary fiscal policy

Answer 12

Increases the level of AD by either increasing government spending or cutting taxes. This can
-Increase consumption by increasing disposable income because of tax cuts
-increase investment by cutting business taxes
-increase government purchases because government spending increases

Question 13

Cutting corporation tax

Answer 13

Firms will have more post tax profits which may mean investment rises. This should boost human capital and physical capital, so increasing the productive capacity of the economy

Question 14

Cutting income tax

Answer 14

It may attract foreign workers to come to the uk to work. This would shift lras to the right

Question 15

Multiplier

Answer 15

An initial change in an injection or leakage that leads to a much greater final change in real national income

Question 16

Marginal propensity to consume

Answer 16

The proportion of any additional income that is spent and passed on around the circular flow of income

Question 17

Progressive tax

Answer 17

Where those on higher incomes pay a higher proportion of their income in tax
compared with those on lower incomes.

Question 18

Regressive tax

Answer 18

Average rate of tax paid falls as incomes rise

Question 19

Marginal propensity to save

Answer 19

Represents the amount of each extra pound that the consumer saves when given an extra pound in income