9 macroeconomic policy Flashcards
inflationary rate target definition
the CPI inflation rate target set by the government for the BOE to achieve (2%)
monetary policy committee definition
9 economists that meet to set the interest rates and decide if other aspects of monetary policy needs changing
bank rate definition
the rate of interest the bank of England pays to commercial banks on their deposits
liquidity definition
measures the ease with which assets can be turned into cash without a loss in value
money supply definition
the stock of money in the economy, made up of cash and bank deosits
contractionary monetary policy definition
uses higher interest to decrease aggregate demand
expansionary monetary policy definition
uses lower interest rates to increase aggregate demand
fiscal policy definition
involves the use of taxation, pubic spending and the government’s budgetary position to achieve government objectives
monetary policy definition
Policies that manipulate the money supply and interest rates and regulate the activities of banks to achieve monetary objectives such as an inflation rate target and availability of liquidity (loans).
demand-side fiscal policy
used to increase or decrease the level of aggregate demand uses government spending and taxation
deficit financing definition
deliberately running a budget deficit and borrowing to finance the deficit
supply-side fiscal policy definition
used to increase the economy’s ability to produce and supply goods through creating incentives to work, save, invest
progressive taxation definition
a tax is progressive if, as income rises, a larger proportion of income is paid in tax
regressive taxation definition
Are usually indirect taxes and although all tax payers pay the same tax on identical transactions the tax as a proportion of income will be higher at lower levels of income e.g. petrol duty
proportional taxation definition
when the proportion of income paid in tax stays the same as income increases
