Demand Side Policies

Question 1

What is the difference between fiscal and monetary policies?

Answer 1

Fiscal include taxes and gov spending.

Monetary include interest rates and money supply

Question 2

What are examples of expansionary fiscal policy?

Answer 2

Cutting taxes - direct, indirect, corporation

Raising government spending - capital spending(schools hospitals),
Current spending (wages)

Increasing budget deficit - government bonds, borrow to spend

Question 3

What are examples of contractionary fiscal policy?

Answer 3

Raising taxes - direct, indirect and corporation tax

Cutting gov spending - capital spending, current spending

Reducing the budget deficit - cutting borrowing and reducing the debt repayments

Question 4

What is fiscal policy?

Answer 4

The use of taxes, government spending and government borrowing to achieve its objectives

Question 5

What is monetary policy?

Answer 5

The manipulation by the government of monetary variables such as interest rates and the money supply to achieve its objectives