Econ Theme 4b- Policy toolkit Flashcards
Overlapping policies
- supply side policies and fiscal policy
-monetary and ER policies
Direct Controls
Policies outside of market forces that controls part of an economy
e.g. Min wage
Discretionary
intentional government policies to increase or decrease government spending or taxation
Automatic Stabilisers
policies which offset fluctuations in the economy. They are triggered without government intervention.
problem faced by policymakers
Inaccurate information
Risks and uncertainty
Inaccurate Information (policy toolkit problems)
-hard to track unemployment
e.g. in India 90% of people have unregistered jobs
Risks and uncertainty(policy toolkits problems)
-uncertain how policy will work = risk
e.g. in 1947 UK was uncertain about how to help Tanzania , they decided to invest in specialist machinery however it didn’t work as workers didn’t know how to use it and because of humid weather so £36 million lost and land was destroyed
Fiscal deficits
Fiscal deficits occur when public expenditure is greater than tax revenue.
Laffer Curve
Global Competitiveness Index value
to measure international competitiveness
Transfer Pricing
-TNC have lots of daughter companies
-allows parent companies to move profits between their daughter companies, in order to minimise the corporation tax they have to pay.
Regulating Transfer pricing
World bank recommends Arms Length Principle
-Any transaction between daughter companies, the price should be the same as it would be if company was selling its good to a third party
-if not give fine
Eval of regulation of Transfer Pricing
- TNC are footloose
- can just pack up and leave
- developing countries like Taiwan with apple don’t want their people to lose jobs so scared too do regulation
- solution = global agreement
