CHAPTER 38 DEMAND SIDE POLITICS Flashcards
Balanced budget
A statement of spending and income plans by the government where spending is equal to its receipts, mainly tax revenues.
Bank of England base rate
The rate of interest charged by the bank of England to banks to borrow money overnight. It is the most important interest rate in the UK’s financial system because it influences other interest rates in the UK such as saving rates and rates on interest on loans by banks.
Budget
A statement of the spending and income plans of an individual firm or government. The budget is the yearly statement on government spending and taxation plans in the UK.
Budget deficit
A deficit which arises because government spending is greater than its receipts. Government therefore has to borrow money to finance the difference.
Budget surplus
A government surplus arising from government spending being less than its receipts. Government can use the difference to repay part of the national dept.
Contractionary fiscal policy
Fiscal policy which leads to a fall in aggregate demand
Contractionary monetary policy
Monetary policy which leads to a fall in aggregate demand
Direct tax
A tax levied directly on individuals or companies such as income tax or corporation tax
Exansionary fiscal tax
Fiscal policy which leads to an increase in aggregate demand.
Expansionary monetary tax
Monetary policy which leads to a rise in aggregate demand
Fiscal policy
The use of taxes, government spending and government borrowing by government to achieve its objective
Fiscal stance or budget position
Whether fiscal policy is exansionary, Contractionary or neutral
Indirect tax
A tax levied on goods and services, such as value added tax, excise duties or council tax
Instrument of policy
An economic variable, such as the rate of interest, income tax rate or government spending on education, which is used to achieve a target of government policy
Monetary policy
The manipulation by government of monetary variables, such as interest rates and the money supply, to achieve its objectives.
National dept
The total accumulated borrowing of government which remains to be paid to lenders
Neutral fiscal policy
When changes to government spending and taxation leave the overall budget surplus or deficit unchanged and have no effect on aggregate demand
Public sector net borrowing (PSNB)
The office name given to the difference between government spending and its receipts
Public sector net dept (PSND)
The office name given to the national dept in the UK
Quantitative easing
A monetary policy instrument where the central bank buys financial assets in exchange for money in order to increase borrowing and lending in the economy
Rate of interest
The price of money, determined by the demand and supply of funds in a money market where there are borrowers and lenders