2.6 Introduction To Macroeconomic Policy Flashcards
BOP
Measure of difference between money flows in and out of an economy
Deregulation
Removal of government laws and restrictions pertaining to trade and business - aim of increasing competition and efficiency
Direct tax
Amount of money paid to government by the individual or organisation themselves. Cannot be avoided or shifted to another person or organisation
Fiscal policy
Use of taxation and public spending by gov to influence economy
Government spending
Amount of money spent on country’s behalf
Interest rates
Amount paid by borrowers of money to lenders - e.g bank rate - the amount commercial banks pay to central bank to borrow money
Monetary policy
Strategies used by govs/central banks to influence economies by affecting cost or supply of money
E.g setting interest rates + quantative easing
National debt
Money owed by state to creditors
Supply side policies
Strategies gov undertakes - aim to shift LRAS to the right
Indirect tax
Government charges to people and businesses
Economic growth
Increase in GDP over period of time
Can be broken into short run growth (increase in aggregate demand curve) or long run growth (increase in long run aggregate supply curve
Exchange rate policy
Government decisions to manipulate exchange rates (‘managed’ or ‘fixed’) or leave it to be determined by market forces (‘floating’)
Expansionary
Macro strategies that seek to stimulate economic growth within economy
Contractionary
Macro strategies that seek to reduce economic activity within an economy in order to avoid potential overheating
Austerity measures
Policy involving reduction in government expenditure and an increase in taxation in order to reduce government budget deficit
Also has effect of reducing economic growth via reducing injections and increasing leakages
