Fiscal ,Monetary,Supply side policy Flashcards
what is monetary policy?
what affect would a decrease in interest rates do ?
what effect would an increase in interest rates do?
changes to interest rates, money supply, and exchange rate by the central bank. in order to influence Aggregate demand.
Expansionary Monetary policy (decrease in interest rates )
-increase demand pull inflation
-increase growth
- reduce unemployment
-promote investment
contractionary monetary policy(increase in interest rates)
-reduce inflation
-reduce current account deficit
what is the UK’s inflation target ?
2%
what is fiscal policy?
how would they promote expansionary growth ?
what effect would Expsionary growth have?
changes to goverenment spending and taxation in order to influence AD
- reduction in income tax
-reduction in corporation tax
-increase in government spending
-Boost growth
-reduce unemployment
-increase inflation
-redistribute income
how would they promote contractionary growth?
what effect would contractionary fiscal policy have?
-increase taxes
- Decrease government spending
- reduce inflation
-reduce the national debt
-reduce current account deficit
what is progressive tax?
what is marginal tax?
what is a regressive tax?
progressive tax= a Tax in which the marginal tax rate rises with income
marginal= tax on addition income
regressive tax = a tax bearing more heavily on the poorer members of society
what is a government budget deficit?
a situation in which government expenditure exceeds government revenue
what is the supply-side policy?
list some policies
supply-side policies are policies implemented in order to improve the long-run productive potential of an economy
-education and training
-immigration
-infrastructure
-deregulation
what are some disadvantages of supply-side policies?
- time lags
-costly
-potential government failure
