Government and the Macroeconomy Flashcards
Chapter 4
Macroeconomic aims
1) economic growth
2) low unemployment
3) stable price
4) balance of payment
5) redistribution of income
Tax
compulsory (บังคับ) payment made to the government by all people in an economy
Fiscal policy
Decisions on government spending and taxation to influence aggregate demand
- government spending
- taxation
Monetary policy
Decision on the money supply, interest rate and foreign exchange rate to influence aggregate demand
- money supply
- interest rate
- foreign exchange rate
Supply side policy
Polices that enhance the productive potential of an economy by improving the quality and quantity of FOP
- education + training
- labour market reform
- lower income tax
- deregulation
- incentive to work (lower direct tax)
- incentive to invest (lower corporate tax)
- privatisation
Economic growth
increase in real output over time
GDP
Main measure of total value of all the goods and services produced in a given period of time
Recession
significant decline in economic activity
Type of unemployment
- Frictional unemployment (changing in between jobs)
- Cyclical unemployment (during recession) - due to falling demand & income
- Structural unemployment (changes in industrial)
- Seasonal unemployment
Unemployment rate
number of unemployed people / labour force
Inflation
general & sustained increase in the level of prices of goods and serves in an economy over a period of time
Deflation
decrease in general price level of goods and services and occurs when the inflation falls below 0%
Disinflation
general price of goods and services does not fall below 0%, still increase but at a slower rate
Base year
first year with which the prices of subsequent years are compared
Inflation rate
% change in annual CPI
