Fiscal and monetary policy

Question 1

What are the 8 macroeconomic objectives

Answer 1

Full employment, price stability, steady and sustainable economic growth, balanced BOP, Equitable distribution of income and wealth, balanced budget, repay national debt

Question 2

What is the aim of fiscal policy

Answer 2

Stimulate economic growth and stabilise the economy

Question 3

What are the role of automatic stabilisers

Answer 3

Fiscal instruments influence the rate of economic growth and help counter swings in the economic cycle

Question 4

How do automatic stabilisers assist in periods of high economic growth

Answer 4

During high growth, incomes increase, so people pay more tax, allowing government to collect more tax revenues. Unemployment also falls in high growth periods, so less spent of unemployment benefits, thus creating more government income. (Vice versa in a recession)

Question 5

Direct tax

Answer 5

A tax levied on an individual or organisation

Question 6

Indirect tax

Answer 6

A tax levied on a good or service

Question 7

Progessive tax

Answer 7

A tax that increases as taxable income increases

Question 8

Regressive tax

Answer 8

A tax that is applied uniformly regardless of income

Question 9

What does expansionary fiscal policy aim to achieve

Answer 9

An outward shift in AD