Chapter 3: Macroeconomics And Public Finance

Question 1

Short-term STABILISING measures taken by the central bank of a country….

Answer 1

Monetary policy

Question 2

What does the CB regulate through monetary policy?

Answer 2

Price fluctuations
Balance of Payment
International value of the currency
Employment

Question 3

Price fluctuations
Balance of Payment
International value of the currency
Employment

Answer 3

What the CB regulate to allow for long term economic growth

Question 4

Name the 4 key instruments of monetary policy?

Answer 4

Open market operations
Reserve Requirement
Interest rate interventions
Direct controls over credit

Question 5

What does monetary policy aim to affect? (3)

Answer 5

Money supply
Credit extension by financial institutions
Interest rates

Question 6

What are open market operations by CB?

Answer 6

Whereby gov bonds are either bought or sold from the public by CB to influence deposits in commercial banks and therefore credit extension

Question 7

What are reserve requirements?

Answer 7

Banks are required to hold portions of their deposits as reserves with the CB

Question 8

What are interest rate interventions?

Answer 8

Through base rates or direct controls over rates set by commercial and other financial institutions

Question 9

What are Direct controls?

Answer 9

CB has Direct controls over the amount and direction of credit creation by the financial sector

Question 10

Name the 6 tax systems:

Answer 10

Income tax
Wealth taxation
Consumption taxation
User charges
Consumer tariffs
Nominal fees

Question 11

What is fiscal policy?

Answer 11

Deliberate actions taken by government to influence the economy by changing levels of gov expenditure and or taxation.

Question 12

Deliberate actions taken by government to influence the economy by changing levels of gov expenditure and or taxation….

Answer 12

Fiscal policy

Question 13

Name other government revenues

Answer 13

Consumer tariffs
User charges
Nominal levies
Interest from cash investments
Grants and subsidies from other gov institutions 
Rent payment

Question 14

Define a tax subject:

Answer 14

Person or legal entity personally responsible for paying tax that is imposed by legislation

Question 15

Examples of tax subjects

Answer 15

Individuals, companies, CCs, estates, clubs, associations, trusts

Question 16

Tax objects

Answer 16

Refers to what upon which tax is payable in the tax subject’s possession

Question 17

Examples of tax objects :

Answer 17

Personal income, company income, wages, salaries, fixed or personal propert, consumer goods and services, excise goods, imported goods

Question 18

What is the tax base

Answer 18

The part of the tax object upon which tax payable is calculated

Question 19

What is the tax rate?

Answer 19

The percentage of the value of the tax base payable by the subject of taxation

Question 20

What is the effective tax rate:

Answer 20

The real percentage value payable

Question 21

What are the two characteristics of taxation?

Answer 21

1. Compulsory

2 no quid pro quo- no direct relationship between tax paid and benefits received

Question 22

What is monetary policy?

Answer 22

Short-term STABILISING measures taken by the central bank of a country.