Chapter 9 - Macroeconomic Policy

Question 1

POLICY INSTRUMENT

Answer 1

a tool used to achieve a policy objective

Question 2

BANK OF ENGLAND

Answer 2

central bank in the uk which is in charge of monetary policy

Question 3

CENTRAL BANK

Answer 3

controls the banking system and is implements monetary policy for the government

Question 4

MONEY

Answer 4

an asset used as a medium of exchange

Question 5

INFLATION TARGET RATE

Answer 5

the CPI target rate set by the treasury for the BoE to achieve. currently 2%

Question 6

MONETARY POLICY COMMITTEE (MPC)

Answer 6

nine economists chaired by BoE governor who set base interest rate and other monetary policies

Question 7

BANK RATE

Answer 7

rate of interest the BoE pays high street banks on deposits held at tHE BoE

Question 8

LIQUIDITY

Answer 8

the ease at which assets can be turned in to cash without a loss in value

Question 9

MONEY SUPPLY

Answer 9

the stock of money in an economy

Question 10

CONTRACTIONARY MONETRY POILICY

Answer 10

higher interest rates decrease AD

Question 11

EXCHANGE RATE

Answer 11

the price of currency compared to another currency

Question 12

EXPANSIONARY MONETRY POLICY

Answer 12

lower interest rates increase AD

Question 13

FISCAL POLICY

Answer 13

tax and gov. spending to achieve policy objectives

Question 14

BUDGET DEFICIT

Answer 14

gov. spending exceeds tax revenue - expansionary

Question 15

BALANCED BUDGET

Answer 15

gov. spending equals tax revenue

Question 16

BUDGET SURPLUS

Answer 16

gov. spending is less than tax revenue - contractionary

Question 17

DEMAND-SIDE FISCAL POLICY

Answer 17

shift AD using taxes and government spending

Question 18

PUBLIC SECTOR BORROWING

Answer 18

borrowing to finance a budget deficit

Question 19

EXPANSIONARY FISCAL POLICY

Answer 19

fiscal policy that shifts AD right

Question 20

CONTRACTIONARY FISCAL POLICY

Answer 20

fiscal policy that shifts AD left

Question 21

DISCRETIONARY FISCAL POLICY

Answer 21

discrete changes to G and T to manage AD

Question 22

CROWDING OUT

Answer 22

increase in gov. spending displaces private spending, with little or no change in AD

Question 23

SOVEREIGN DEBT PROBLEM

Answer 23

debt owned by people outside the country that have sold debt to the government

Question 24

SUPPLY-SIDE FISCAL POLICY

Answer 24

increase the economies ability to produce and supply goods by an increase in the factors of production

Question 25

NATIONAL DEBT

Answer 25

past borrowing that has not been paid back

Question 26

CYCLICAL BUDGET DEFICIT

Answer 26

deficit which rises in the downswing of economic cycle and falls in the upswing

Question 27

CYCLICAL BUDGET SURPLUS

Answer 27

emerges in the upswing of economic cycle

Question 28

STRUCTURAL BUDGET DEFECIT

Answer 28

a change in the structure of an economy affecting the governments finances

Question 29

PROGRESSIVE TAXATION

Answer 29

as income rises, more tax is paid

Question 30

REGRESSIVE TAXATION

Answer 30

as income increases, less tax is paid

Question 31

PROPORTIONAL TAXATION

Answer 31

when proportion of tax paid is the same when income increases

Question 32

TAX THRESHOLD

Answer 32

the level of income that above which people pay tax

Question 33

DIRECT TAX

Answer 33

a tax that you have to pay - income tax

Question 34

INDIRECT TAX

Answer 34

a tax that is put on goods and paid by the producer

Question 35

SUPPLY-SIDE POLICIES

Answer 35

aim to increase economic performance through interventionist policies

Question 36

SUPPLY-SIDE ECONOMICS

Answer 36

government policy should be used to improve the performance of an economy

Question 37

INTERVENTIONALIST POLICIES

Answer 37

occur when the government intervenes in free markets

Question 38

NON-INTERVENTIONALIST SUPPLY-SIDE POLICIES

Answer 38

free up markets and reduce economic role of the state

Question 39

PRIVATISATION

Answer 39

shifting state owned assets to the private sector

Question 40

MARKETISATION

Answer 40

shifting provisions of goods and services from the non-market sector to the market sector

Question 41

DEREGULATION

Answer 41

remove previously imposed regulation (red tape)

Question 42

SUPPLY SIDE IMPROVEMENT

Answer 42

reduce costs in the private sector to become more efficient and competitive