2.6 Macroeconomic objectives and policies

Question 1

Supply side policy

Answer 1

Policies that increase the productive potential of an economy

Question 2

Bond yield

Answer 2

Rate of interest paid on gov debt yet to be repaid. Set by financial markets

Question 3

Cyclical fiscal deficit

Answer 3

Size of deficit influenced by state of economy; boom results in high tax receipts and spending on unemployment benefits is low

Question 4

Structural fiscal deficit

Answer 4

Part of deficit which is not related to state of economy; does not disappear when economy recovers

Question 5

fiscal policy eval

Answer 5

depends on size of output gap: if small, then low impact on growth.
depends on size of multiplier: if large multiplier, no need for high levels of fiscal policy
animal spirit
state of gov finances
in lr, will return to gov
automatic stabilisers
laffer curve
crowding out vs crowding in

Question 6

interventionist SSPs

Answer 6

increased role of gov.
increased spending on education etc.

Question 7

market based SSPs

Answer 7

reduce size of state
e.g. tax cut, NMW reduced, benefits reduced