Chapter 9 - Macroeconomic Policy Flashcards
POLICY INSTRUMENT
a tool used to achieve a policy objective
BANK OF ENGLAND
central bank in the uk which is in charge of monetary policy
CENTRAL BANK
controls the banking system and is implements monetary policy for the government
MONEY
an asset used as a medium of exchange
INFLATION TARGET RATE
the CPI target rate set by the treasury for the BoE to achieve. currently 2%
MONETARY POLICY COMMITTEE (MPC)
nine economists chaired by BoE governor who set base interest rate and other monetary policies
BANK RATE
rate of interest the BoE pays high street banks on deposits held at tHE BoE
LIQUIDITY
the ease at which assets can be turned in to cash without a loss in value
MONEY SUPPLY
the stock of money in an economy
CONTRACTIONARY MONETRY POILICY
higher interest rates decrease AD
EXCHANGE RATE
the price of currency compared to another currency
EXPANSIONARY MONETRY POLICY
lower interest rates increase AD
FISCAL POLICY
tax and gov. spending to achieve policy objectives
BUDGET DEFICIT
gov. spending exceeds tax revenue - expansionary
BALANCED BUDGET
gov. spending equals tax revenue
BUDGET SURPLUS
gov. spending is less than tax revenue - contractionary
DEMAND-SIDE FISCAL POLICY
shift AD using taxes and government spending
PUBLIC SECTOR BORROWING
borrowing to finance a budget deficit
EXPANSIONARY FISCAL POLICY
fiscal policy that shifts AD right
CONTRACTIONARY FISCAL POLICY
fiscal policy that shifts AD left
DISCRETIONARY FISCAL POLICY
discrete changes to G and T to manage AD
CROWDING OUT
increase in gov. spending displaces private spending, with little or no change in AD
SOVEREIGN DEBT PROBLEM
debt owned by people outside the country that have sold debt to the government
SUPPLY-SIDE FISCAL POLICY
increase the economies ability to produce and supply goods by an increase in the factors of production
NATIONAL DEBT
past borrowing that has not been paid back
CYCLICAL BUDGET DEFICIT
deficit which rises in the downswing of economic cycle and falls in the upswing
CYCLICAL BUDGET SURPLUS
emerges in the upswing of economic cycle
STRUCTURAL BUDGET DEFECIT
a change in the structure of an economy affecting the governments finances
PROGRESSIVE TAXATION
as income rises, more tax is paid
REGRESSIVE TAXATION
as income increases, less tax is paid
PROPORTIONAL TAXATION
when proportion of tax paid is the same when income increases
TAX THRESHOLD
the level of income that above which people pay tax
DIRECT TAX
a tax that you have to pay - income tax
INDIRECT TAX
a tax that is put on goods and paid by the producer
SUPPLY-SIDE POLICIES
aim to increase economic performance through interventionist policies
SUPPLY-SIDE ECONOMICS
government policy should be used to improve the performance of an economy
INTERVENTIONALIST POLICIES
occur when the government intervenes in free markets
NON-INTERVENTIONALIST SUPPLY-SIDE POLICIES
free up markets and reduce economic role of the state
PRIVATISATION
shifting state owned assets to the private sector
MARKETISATION
shifting provisions of goods and services from the non-market sector to the market sector
DEREGULATION
remove previously imposed regulation (red tape)
SUPPLY SIDE IMPROVEMENT
reduce costs in the private sector to become more efficient and competitive
