Exam 25th QE, Fiscal, Monetary

Question 1

what is fiscal policy

Answer 1

Fiscal policy is government spending and taxation put in place to try and maintain economic stability

Question 2

what is monetary policy

Answer 2

Monetary policy is the use of interest rates and supply of money (QE)

Question 3

what is fiscal policy used for

Answer 3

fiscal policy is used to try and achieve the macroeconomic objectives.

Question 4

what is monetary policy used for

Answer 4

monetary policy is used to control the money supply and achieve economic growth

Question 5

what is loose or expansionary monetary policy

Answer 5

loose or expansionary monetary policy seeks to stimulate production and employment by INCREASING THE AVAILABILITY OF MONEY AND CREDIT AND LOWERING INTEREST RATES.

Question 6

what is loose or expansionary fiscal policy

Answer 6

loose or expansionary fiscal policy is when the government LOWER TAXES AND INCREASE GOVERNMENT SPENDING.

Question 7

what is tight monetary policy

Answer 7

tight monetary policy seeks to limit the pace of economic growth and decrease the demand for money. this is usually to reduce inflation

Question 8

what is tight fiscal policy

Answer 8

tight fiscal policy is when taxes are raised and government spending it reduced. this is done to improve government finances.

Question 9

what are the 5 steps of quantitive easing

Answer 9

1. The bank of England produces lots of money by crediting it to their accounts.
2. They then issue bonds for sale
3. They then use this produced money to purchase the bonds back from the market (big insurance companies and banks)
4. This means that banks are then more likely to offer loans as they have more money, pumping money into the economy.
5. Then and loans are payed back, the banks rebuy the bonds and the money used is returned to the bank of England.

The bank of England is also likely to lower interest rates when doing this, so people are more likely to want to take out a loan.