4.5 Role of the state in the macroeconomy

Question 1

current spending

Answer 1

public sector worker wages, raw materials that are used up immediately

no income is generated from these

Question 2

capital spending

Answer 2

capital items and infrastructure. This spending should generate a future income stream

Question 3

discretionary fiscal changes

Answer 3

Deliberate attempts to affect the level and growth of aggregate demand

Question 4

automatic stabilisers

Answer 4

changes in tax revenues and government spending that come about automatically as an economy moves through the business cycle

Question 5

public sector debt

Answer 5

measure of the accumulated national debt owed by the government sector

Question 6

structural deficit

Answer 6

part of the deficit which is not related to the state of the economy

Question 7

cyclical deficit

Answer 7

size of the deficit is influenced by the state of the economy

Question 8

universal basic income

Answer 8

when all adults receive a no-strings-attached amount of money from the state to cover the basic cost of living, regardless of income and wealth

Question 9

transfer pricing

Answer 9

profit shifting

when a TNC moves the profits they have made from
subsidiaries in a high tax country to other subsidiaries in a lower tax nation

can be corrected by using diverted profit tax, stronger audit procedures, criminal sanctions for TNCs, international agreements on corporation tax