2.6

Question 1

What’s a macroeconomic policy

Answer 1

Aims by the government to control the level of activity in the economic so the standards of living improve

Question 2

What are the 4 main objectives

Answer 2

Low/stable prices (no inflation)

Low unemployment

Economic growth

Balance of exports and imports (exports greater than imports)

Question 3

What’s the difference between contractionary and expansionary

Answer 3

C is used to slow down the rate of growth during a boom. Done by higher taxes, higher interest or gov cuts

E is used to speed up

Question 4

Fiscal policy

Answer 4

Changes in tax and govt spending

C: tax increased, gov cuts –> low disposable income, low demand, low output, high unemployment due to low demand, AD decreased.

E is the opposite

Question 5

Monetary policy

Answer 5

Uses interest rates (bank of England not govt)

C: base rate increased, lower disposable income, lower demand, ad decreases, unemployment increases

E is opposite

Question 6

Supply side

Answer 6

All measures designed to increase productivity by increasing aggregate supply

Meets all targets

Examples include:

Cut taxes increase incentive to work
Cut benefits
Education
Privatisation (increases competition and this supply)