7) Implementing Policies - MMT

Question 1

What is macroeconomics the study of?

Answer 1

Is the study of whole economies, the part of economics concerned with large-scale or general economic factors and how they interact in the economy

Question 2

What is central of macroeconomics?

Answer 2

The role of the government

Question 3

Every government will set a number of…

Answer 3

Macroeconomic objectives

Question 4

What is the most common macroeconomic objective?

Answer 4

Economic growth

Question 5

What are the most common 3 macroeconomic objectives?

Answer 5

1) Economic growth
2) stable prices
3) low unemployment

Question 6

What are additional macroeconomic objectives?

Answer 6

Stable balance of payments and a fairer distribution of income within the economy

Question 7

Are there opinions on the macroeconomic objects?

Answer 7

Nearly all economists agree that growth, stable prices, low unemployment etc are desirable outcomes, where economists strongly disagree is interpreting how these goals should be achieved

Question 8

What is the Austrian school branch of economic thought?

Answer 8

Believes that they should only be minimal intervention by the government, essentially arguing that the free market will achieve the macroeconomic objectives on its own, provided the government allows it

Question 9

What is the Keynesian school branch of economic thought?

Answer 9

Argues for a much more active degree of government intervention

Question 10

What is the Monetarists branch of economic thought?

Answer 10

Argue that one type of intervention is far preferable to the others

Question 11

What does Implementing Policies assumes?

Answer 11

Assumes that the government is not Laissez-Faire and wants to intervene in order to make the economy better

Question 12

What does Implementing Policies outline that the government could adopt to make the economy better?

Answer 12

1) Fiscal Policy
2) Monetary Policy
3) Supply-side policies

Question 13

What sort of government intervention is fiscal policy concerned with?

Answer 13

Fiscal Policy is concerned with direct government intervention into the economy.

Question 14

What is Fiscal Policy all about?

Answer 14

Fiscal policy is all about G&T; G is Government Expenditure, T its taxation.

Question 15

What is the aim of fiscal policy?

Answer 15

The aim of fiscal policy is to influence AD through the use of G and T. For example, higher G (or lower T), should increase AD; lower G (or higher T) might reduce AD

Question 16

What is a brief overview of Fiscal Policy?

Answer 16

Fiscal Policy is concerned with direct government intervention into the economy. Fiscal policy is all about G&T; G is Government Expenditure, T its taxation. The aim of fiscal policy is to influence AD through the use of G and T. For example, higher G (or lower T), should increase AD; lower G (or higher T) might reduce AD

Question 17

What type of intervention is Monetary Policy?

Answer 17

Monetary Policy is a form of indirect intervention in the economy.

Question 18

Why is monetary policy indirect?

Answer 18

One reason that it’s indirect, for most countries, is that it’s not carried out by the government itself, rather by the central bank. Another reason that it’s indirect is that it uses tools like interest rates to influence AD.

Question 19

With monetary policy, what happens when you increase/ decrease interest rates?

Answer 19

if the Bank of England increases the base rate of interest, this will ultimately make it more expensive for business and households to spend money, leading to a reduction in AD overtime. Obviously, a lower rate of interest should have the effect of increasing AD over time.

Question 20

What is a brief overview of Monetary Policy?

Answer 20

Monetary Policy is a form of indirect intervention in the economy. One reason that it’s indirect, for most countries, is that it’s not carried out by the government itself, rather by the central bank. Another reason that it’s indirect is that it uses tools like interest rates to influence AD. For example, if the Bank of England increases the base rate of interest, this will ultimately make it more expensive for business and households to spend money, leading to a reduction in AD overtime. Obviously, a lower rate of interest should have the effect of increasing AD over time.

Question 21

Who are supply-side policies normally created by?

Answer 21

Supply side policies are normally created directly by the government but their aim is to influence AS, not AD.

Question 22

Does AS depend on the public or private sector of the economy?

Answer 22

Remember that AS depends largely facing the private sector of the economy when it comes to producing goods and services.

Question 23

What is the goal of supply-side policies?

Answer 23

If the government can introduce policies that reduce these costs (eg by reducing the number of rules businesses have to follow), then the AS should shift to the right and many of the governments macroeconomic objectives may be achieved.

Question 24

What is a brief overview of Supply-side policies?

Answer 24

Supply side policies are normally created directly by the government but their aim is to influence AS, not AD. Remember that AS depends largely facing the private sector of the economy when it comes to producing goods and services. If the government can introduce policies that reduce these costs (eg by reducing the number of rules businesses have to follow), then the AS should shift to the right and many of the governments macroeconomic objectives may be achieved.

Question 25

Fiscal and monetary policies are known as…

Answer 25

Demand-side policies; their aim is to influence levels of AD

Question 26

Why are fiscal, monetary and supply-side policies used?

Answer 26

They are used by governments everywhere to help them achieve their macroeconomic objectives

Question 27

Why do supply-side policies exist?

Answer 27

Exist in order to influence AS

Question 28

In the UK which policies will be used?

Answer 28

In the UK, like most countries, a combination of all three policies will be used