Chapter 2

Question 1

what is a state-controlled economy

Answer 1

one in which the state decides what is produced and how it is distributed

Question 2

what is a market economy

Answer 2

the forces of supply and demand determine how resources are allocated

Question 3

what are mixed economies

Answer 3

a combination of a market economy which has an element of state control

Question 4

what are open economies

Answer 4

a countries economic relationship with outside countries is on good terms where there are few barriers to trade or any controls over FX

Question 5

what are the macroeconomic objectives

Answer 5

full employment
economic growth
low inflation
balance of payments equilibrium

Question 6

stages of an economic cycle

Answer 6

in a wave like trend as an economy experiences a contraction after an expansion and so on

Question 7

what is fiscal policy

Answer 7

any action by the government to spend money or collect money with the purpose of influencing the condition of the economy

Question 8

implications of fiscal policy for businesses

Answer 8

planning for businesses is easier if government policy is stable
if taxation increases due to government policy then. costs for businesses will increase and vice versa

Question 9

what is monetary policy

Answer 9

the regulation of the economy through control of the monetary system by operating on such variables as the money supply, the level of interest rates and the conditions for the availability of credit