Chapter 2: The Economic Environment

Question 1

What is a State-Controlled Economy?

Answer 1

The government decides what is produced and how it is distributed.

Question 2

What is a State-Controlled Economy also known as?

Answer 2

Planned Economy

Question 3

What does Open Economy relate to?

Answer 3

A countries economic relationship with outside countries. In an open economy there are few barriers to trade.

Question 4

What is protectionism?

Answer 4

When a country prevents other countries from trading freely with it in order to preserve its own market.

Question 5

What does fiscal policy involve?

Answer 5

Making adjustments to government spending and taxation. Government

Question 6

What does monetary policy involve?

Answer 6

Adjustments to interest rates and money supply. BoE

Question 7

Governments use a variety of policies to reduce the impact of fluctuations in the economy. What are these policies known as?

Answer 7

Stabilisation policies.

Question 8

What are the 4 main Macroeconomic Objectives?

Answer 8

Full employment
Economic growth
Low inflation (2%)
Balance of payments equilibrium

Question 9

Can you name the stages of the Economic Cycle?

Answer 9

Peak
Contraction
Trough
Expansion
Peak

Question 10

At what stage of the economic cycle is GDP expected to decrease?

Answer 10

Peak