26. Government polices and objectives Flashcards
1
Q
What are the 4 desirable goals of the government ?
A
- Low inflation
- Low levels of unemployment
- Economic growth
- Balance of payments
2
Q
How does decreasing government spending reduce inflation ?
A
- Less money in the economy to spend
- Overall spending goes down
- Less produces sold
- Prices go down
3
Q
How does increasing interest rate reduce inflation?
A
- People borrow less money
- People have less money to spend
- Demand goes down
- Prices go down
4
Q
How does increasing corporation tax reduce inflation ?
A
- Less money for shareholders to spend
- Demand goes down
- Prices goes down
5
Q
How goes decreasing income tax increase employment ?
A
- More disposable income
- People buy more goods
- Increase demand = increase production
- More likely to expand business
- Creates job opportunities
6
Q
Define inflation
A
increase in prices
7
Q
Define unemployment
A
People who are willing/able to work and are unable to find jobs
8
Q
Define Economic growth
A
GDP increases and more goods and services and produced.
9
Q
What are the 4 steps in the business cycle ?
A
- Growth
- Boom
- Recession
- Slump
10
Q
What is growth?
A
- GDP rises
- Employment rates go up
- Most business do well
11
Q
What is boom?
A
- Inflation (prices rapidly increase)
- Too much spending
- Shortage of skilled workers
- Business uncertain about the future
12
Q
What is recession ?
A
- GDP falls
- Unemployment
- Falling demand
- Falling profit
- Too little spending
13
Q
What is slump?
A
- High level of unemployment
- Prices fall
- Many business fail to survive
14
Q
Define fiscal policy
A
Change by the government in tax rates or public sector spending
15
Q
Define Direct taxes
A
Paid directly from incomes
