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Economics Theme 2 Key Term Glossary- The UK Economy, Performance and Policies > 2.6.2 Demand-side policies > Flashcards

2.6.2 Demand-side policies Flashcards

1
Q

Austerity

A

Economic policy aimed at reducing a governments deficit (or borrowing)

Austerity can be achieved through increases in government revenues

and/or

A reduction in government spending or future spending commitments

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2
Q

Automatic stabilisers

A

Automatic fiscal changes as the economy moves through stages of the business cycle
e.g. a fall in tax revenues from the circular flow in a recession

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3
Q

Budget balance

A

the annual balance between government spending and tax revenue

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4
Q

Budget surplus

A

when tax revenues is greater than government spending

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5
Q

Budget deficit

A

when government spending is greater than tax revenue

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6
Q

Monetary policy rate / Central bank policy interest rate

A

the official lending rate for loans set by a nations central bank
e.g. the Bank Of England or the European Central Bank.

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7
Q

Corporation tax

A

A tax on the profit made by companies
The current rate is 25%

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8
Q

Cyclical budget (fiscal) deficit

A

A deficit which occurs due to a recession in the economy

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9
Q

Discretionary fiscal policy

A

Deliberate attempts to affect the level and growth of aggregate demand

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10
Q

Direct tax

A

taxes that go straight to the government from whoever is paying the tax, the burden of the tax cannot be passed onto to somebody else

E.G. income tax or corporation tax

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11
Q

Exchange rate

A

The price of one countries currency in relation to another

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12
Q

Exchange rate index

A

The trade-weighted external value of a currency

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13
Q

Expansionary monetary policy

A

a policy that aims to increase the rate of monetary expansion to stimulate the growth of a domestic economy

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14
Q

Expenditure-switching policies

A

policies that are designed to “switch” expenditure from imports to domestically produced goods in order to improve the balance of payments and stimulate GDP

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15
Q

Fine-tuning

A

Changes and monetary policy or fiscal policy designed to gradually manage the level of aggregate demand and prices

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16
Q

Fiscal deficit

A

when government expenditure is higher than tax revenue in a given time period

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17
Q

Fiscal policy

A

A government policy regarding taxation and public spending

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18
Q

Fiscal stability

A

A balance between tax revenues and public sector spending

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19
Q

Fiscal stimulus

A

Government measures and at giving a positive jolt to economic activity

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20
Q

Government spending

A

Spending by the government and education, healthcare and defence and other public services

21
Q

Household benefits cap

A

A cap which limits total benefits at £500 per week for a family and £350 per week for a single person with no children

22
Q

Import tariff

A

a tax on imports that maybe ad valorem (%) or a specific tax a (set per unit imported)

23
Q

Indirect taxes

A

taxes on spending
E.G. VAT or exercise duties

producers may be able to pass on an indirect tax- depending on PED and PES

24
Q

Inflation target

A

The bank of England has a CPI inflation target, which is currently 2%

25
Q

Marginal rate of tax (MRT)

A

The rate of tax on the next unit (£1) of income end

26
Q

Monetary policy

A

the use of interest rates and money supply to achieve the macroeconomic objectives such economic growth and inflation

27
Q

Monetary Policy Committee (MPC)

A

A committee of 9 people (including the governor) that meets every month to review the economy and set monetary policy interest rates for the UK

28
Q

Monetary stimulus

A

Changes in monetary policy designed to increase aggregate demand

29
Q

Multiplier effect

A

If there is an initial injection, then the final increase in aggregate demand and real GDP will be greater

30
Q

National debt

A

A governments, total outstanding debt – effectively what the government still owes from the budget deficit accumulated overtime

31
Q

Negative interest rate

A

an interest rate that is below zero. For real interest rates, this can occur when the inflation rate is higher than the nominal interest rate.

32
Q

Office of Budget Responsibility (OBR)

A

A non-departmental public body funded by the treasury who’s purpose is to provide independent economic forecasts and independent of the public finances

33
Q

Patent box

A

A reduced rate of corporation tax apply to profits from patents- design to stimulate research and innovation and improve the supply side of the economy

34
Q

Personal allowance

A

The amount of income you can earn before you start paying income tax

£12,500

35
Q

Progressive tax

A

The marginal rate of tax rises as income rises.

As people earn more income, the rate of tax on each extra pound goes up

36
Q

Proportional tax

A

When the marginal rate of tax is constant leading to a constant average of tax

37
Q

Quantitative easing

A

????

38
Q

Real interest rate

A

Nominal rate of interest adjusted for inflation

39
Q

Redistribution

A

measures taken by government to transfer income from some individuals

40
Q

Regressive tax

A

The rate of tax paid falls as income rises – these taxes hurt people with low income the most

E.G.duties on on tobacco and alcohol

41
Q

Stimulus

A

monetary policy and/or fiscal policy aimed at encouraging higher growth and/or inflation

42
Q

Structural budget deficit

A

The part of the deficit which is not related to the state of the economy. This part of the fiscal deficit will not appear when the economy recovers.

43
Q

Subsidy

A

payments by the government to suppliers that reduce their cost

44
Q

Target

A

an objective of government policy E.G. low inflation

45
Q

Taxation

A

The imposition of taxes on streams of income, commercial activities and wealth by the government

46
Q

Tax burden

A

The amount of tax suffered by an individual or organization

measures total tax revenues as a % of GDP

47
Q

Tax competition

A

happens when a national government uses reforms to the tax system as a supply size strategy to attract investment and jobs into their economy

48
Q

Specific/unit tax

A

A set tax per unit imposed by the government

E.G.the specific tax (duty) on fuel sold in the UK, did duty on a litre of fuel might be 80p

49
Q

Welfare cap

A

A limit on the amount that the UK government can spend on certain Social Security benefits and tax credits
Exclude pensions and jobseekers allowance

Economics Theme 2 Key Term Glossary- The UK Economy, Performance and Policies (23 decks)

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