Economic Management

Question 1

Demand management policies - fiscal policy

Answer 1

Fiscal policy is a government method of macroeconomic stabilisation which refers to the management of the level, composition, and allocation of government taxation and expenditure in order to influence national aggregate demand

Question 2

What are fiscal policy goals

Answer 2

1. Influence the market allocation of resources (reallocation of resources role)
2. Influence the market distribution of income (redistribution of income role)
3. manage aggregate expenditure (the market stabilisation role)

Question 3

what is budget surplus

Answer 3

it is an outcome of fiscal policy which refers to when revenue from taxes, changes and income from government businesses exceeds government expenditure.

Question 4

What is budget deficit

Answer 4

it is an outcome of fiscal policy refers to when the revenue from taxes, changes and income from government businesses is less than government expenditure

Question 5

what are Automatic stabilisers

Answer 5

are features of non-discretionary fiscal policy which refers to those elements of government policy that counterbalance changes in economic activity and demand without international government action .

Question 6

Discretionary fiscal policy

Answer 6

Is a branch of fiscal policy refers to deliberate actions of the government to change the level and composition of taxes and expenditure to directly influence aggregate economic demand.

Question 7

non-discretionary fiscal policy

Answer 7

is a branch of fiscal policy which refers to automatic in built responses in cyclical changes in aggregate economic activity over a fiscal policy period.

Question 8

contractionary fiscal policy stance

Answer 8

refers to a policy stance of the government in which the budget deficit is reduced or a budget surplus is implemented or increased, such that aggregate demand may be reduced within the economy through the multiplier effect and reduced government expenditure.

Question 9

Expansionary fiscal policy stance

Answer 9

refers to a policy stance of the government in which budget surplus is reduced, or a budget deficit is implemented or increased, such that aggregate demand may be improved within the economy through the multiplier effect by increased government expenditure

Question 10

Non Discretionary fiscal policy

Answer 10

The outcome of the budget may often be influenced by changes in the economic cycle automatically triggering none-discretionary changes in fiscal policy. These changes are referred to as an automatic stabilisers, specifically, important economic stabilisers are progressive income tax, unemployment, and welfare benefits.

Question 11

Discretionary fiscal policy

Answer 11

This is where the government deliberately acts to change the level and or composition of taxes and or government expenditure

Question 12

What are the three main goals of the Government when spending the surplus budget

Answer 12

1. Repaying debt from the private sector
2. Repaying debt from the foreign sector
3. Saving to fund future government expenditures or reduce taxation

Question 13

what is Deflationary Gap

Answer 13

it is a consequence of the cyclical nature of a market economy which refers to a situation where the aggregate demand within an economy is less than the aggregate supply at the full employment level of income, hence resulting in an eventual rise in the rate of unemployment.

Question 14

inflationary gap

Answer 14

refers to when the aggregate demand within an economy exceeds the aggregate supply at the full employment level of income, hence, resulting in an eventual rise in the price level and inflation rate

Question 15

what is the crowding out effect

Answer 15

the crowding out effect is a consequence of domestic budget deficit financing which refers to when the government’s increased taxation or borrowed savings from the private sector reduces their ability to spend hence minimising the multiplier effect and disincentivising their expenditure

Question 16

Types of Taxation

Answer 16

1. income taxation
2. company taxation
3. goods and services taxation
4. customs taxations (on imports)

Question 17

forms of taxation

Answer 17

1. proportional taxation - as wages in the economy pays a fixed percentage of their wage to the government
2. Progressive taxation - as wages increase the proportion of income which is taxed increases, and as wages decrease taxation proportions decrease
3. Regressive taxation - as wages decrease the proportion of taxation is increased, whereas as wages increase the proportion of taxation is decreased.

Question 18

what are the main types of government expenditures

Answer 18

1. social security and welfare (income support, Jobkeeper)
2. Infrastructure (roads)
3. industry support (subsidies)

Question 19

what is inflationary expectations

Answer 19

they are qualitative economic indicators which refer to the opinion that households and firms have the future rate inflation - often heavily influenced period, which is then factored into their saving, purchasing and investing decisions.

Question 20

what is inside lag

Answer 20

it refers to the time it takes recognise that the state of the economy indicates that the need to use counter-cyclincal macroeconomic policy, decide on the appropriate policy response and implement it.

Question 21

what is outside lag

Answer 21

refers to the time it takes for the policy measure to have its effect on the targeted economic indicators and the level of economic activity

Question 22

Political constraints

Answer 22

refer to the limitations on government policy actions resulting from the need to tailor polices to win elections, retain popular support, and maintain productive relationships with other nations.

Question 23

what is macroeconomic stabilisation

Answer 23

is a function of the government and RBA in which fiscal policy, monetary policy and microeconomic reforms are used to influence internal stability, external stability and stable sustainable economic growth, such that the natural volatility of a market economic system may be minimised

Question 24

what are some microeconomic challenges for Australian

Answer 24

1. Reform
2. Threat to family life
3. Equality of wealth distribution
4. Ageing work force
5. skills gap
6. climate change
7. housing affordability
8. covid 19