Economics Flashcards
What is the treasury?
The Treasury draws up and carries out the economic policies of the government of the day. Like every other Government department, it has a team of Ministers (elected MPs and peers) who take political responsibility for what their department does. Lead by the Chancellor of the Exchequer.
What is The Office for Budget Responsibility (OBR)?
Set up in 2010 by the Coalition government, its role is to produce independent forecasts about the economy and the government’s finances for the short and medium term.
Examines impact, spending plans, financial risks, view on tax and welfare. Gov don’t need to consult OBR.
What is The Budget?
- The Budget/Budget speech is intended to be a prediction of the direction of the economy in the short-to-medium term (i.e. 1-3 years)
- It is also a review of the government’s financial performance over the preceding 12 months.
- The Chancellor announces plans to raise or reduce existing direct and indirect taxes and public spending, and to prioritise areas of spending ( and saving.)
Different types of taxes?
Direct taxation - a tax on income – taken from individuals or corporations (companies). Usually taken from an employee’s wage packet at the point of payment, with the worker keeping what is left.
Indirect taxation - paid whenever you spend money on goods or services. Examples include: Value Added Tax (VAT), Duty tax (alcohol, fuel, tobacco)
Three significant other taxes?
Corporation tax.
Capital Gains Tax.
Inheritance Tax.
What is a “recession?”
A shrinking/slowing down of the economy. There is a reduction in growth i.e. fewer people are spending > less money being spent > business don’t grow as much or shrink, or go out of business altogether.
What is “inflation?”
This is a measure of how the prices of goods and services have increased. It is calculated on a monthly basis. As the cost of goods and services rises, the purchasing power of money falls. Inflation reduces the purchasing power of money since more money is now needed to buy the same items.
What is “Gross Domestic Product (GDP)?”
The GDP is the total profit from all goods and services generated in Britain in a single financial year, regardless of which state or country benefits from them.
How is inflation measured?
Consumer Price Index (CPI) -
The change in inflation is measured using a supposedly typical “shopping basket” of the average consumer – on the list are goods that are typically purchased. The contents of the list change to reflect the time, economy, culture
Retail Price Index (RPI) - takes into account mortgage payments and council tax so the figure quoted is usually higher than CPI.
