Differentiating economic Policies

Question 1

Fiscal Policy

Answer 1

• Changes in government spending

- Changes in Taxation

Question 2

Monetary Policy

Answer 2

• Changes in the Money supply

- Changes in the national interest Rate

Question 3

Supply side polices

Answer 3

• Increase incentives to work efficiently
• Promoting Competition
• improving workers skills
• improving infrastructure
• taxes on income
• regulate Unemployment benefits
• subsidise workers for overtime work
• taxes on profits
• research and development

Question 4

Austerity Policies

Answer 4

• Aiming for a budget surplus
• Government spending down
• taxes up

Question 5

Expansionary fiscal policy

applied in depression or recession

Answer 5

• increased government spending
• decreased taxation

—> Multiplier effect

Question 6

Contractionary fiscal policy

applied in Boom or Recovery

Answer 6

• decreased Government spending
• increased taxation

—> decrease inflation by lowering AD

Question 7

Expansionary Monetary policy

applied in a Recession or Depression

Answer 7

• Reduced interest Rates

—> less saving and more borrowing
—> increase in AD

Question 8

Contractionary Monetary policy

applied in a Boom or Recovery

Answer 8

• Increased interest Rates

—> more saving, less borrowing / spending
—> decreases AD and lowers consumer spending