Fiscal policy and supply-side policies

Question 1

fiscal policy

Answer 1

involves government spending and taxation is used to influence the economy as a whole

Question 2

Expansionary fiscal policy

Answer 2

boosting AD by increasing Government spending and lowering taxes

Question 3

contractionary fiscal policy

Answer 3

reducing aggregate demand by reducing government spending and increasing taxes

Question 4

automatic stabilisers

Answer 4

Fiscal policy reacting to changes in the economic cycle they reduce the problems recession causes by increasing or decreasing government spending or tax

Question 5

discretionary policy

Answer 5

where the government deliberately change the level of spending and tax

Question 6

Structural budget position

Answer 6

is a long term fiscal stance which is there budget position throughout the economic cycle

Question 7

cyclical budget position

Answer 7

the governments fiscal stance in the short term

Question 8

structual budget deficit

Answer 8

when spending is more than revenue in the long term creating national debt

Question 9

horizontal equity

Answer 9

this means people who have similar incomes should pay the same amount of tax

Question 10

vertical equity

Answer 10

people on higher incomes and great ability to pay tax should pay more than lower incomes

Question 11

Progressive tax

Answer 11

when an individual taxes rises as their income rises

Question 12

Regressive tax

Answer 12

when a individuals taxes fall as incomes rise

Question 13

proportional tax

Answer 13

when everyone pays the same amount of tax regardless of income

Question 14

consequences of Budget deficit

Answer 14

excessive borrowing could cause demand pull inflation

It could lead to higher interest rates discouraging investment meaning exports are less competitive

Question 15

OBR

Answer 15

office of budget responsibility which analyses public spending, taxation and predictions of spending

Question 16

consequences of large national debt

Answer 16

reducing lending from other countries limiting growth, less attractive to FDI due to uncertainty, excessive borrowing causes inflation and interest rates to rise causing crowding out

Question 17

supply side policy

Answer 17

expand productive potential of an economy increasing trend rate of growth

Question 18

free market supply side policies

Answer 18

aim to increase efficiency by removing things which interfere with the market through deregulation and privatisation

Question 19

interventionist supply side policies

Answer 19

aimed at correcting market failure through spending on education, improving on infastructure

Question 20

demand side policies

Answer 20

help to stabilise the economy in the short term

Question 21

supply side policies tackling unemployment

Answer 21

create new equilibrium position in the labour market through increasing incentive for supply causing the equilibrium position to move to the right

Question 22

benefits of supply side policies

Answer 22

unemployment falls as the economy grows

cost push inflation is reduced

increased competitiveness