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Economics - IGCSE > Government And The Macroeconomy > Flashcards

Government And The Macroeconomy Flashcards

1
Q

What are the roles of the government locally?

A

Establish local taxes
Provide a number of local services
Establish rules and regulations
Invest on local infrastructure

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2
Q

Government roles at national level?

A

Establish national taxes
Manage the economy using fiscal, supply side and monetary policies
Provide a number of national services

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3
Q

Government roles at international level?

A

Engage in bilateral and multilateral negotiations with other countries
Interact with financial institutions
Interact with other countries to create treaties and agreements

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4
Q

Economic growth has to take into account sustainability. What is sustainability?

A

The idea that that the interests of future as well as present generations are taken into account.

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5
Q

What is GDP?

A

Gross Domestic Output is the total value of all that has been produced within the geographical boundaries of a country over a given period of time.

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6
Q

What is inflation?

A

The increase in the general level of prices in an economy over a period of time.

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7
Q

What are the government macroeconomic aims?

A

Economic growth
Low unemployment/full employment
Low inflation/stable prices
Balance of payment stability
Redistribution of income

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8
Q

What is BOP?

A

Balance Of Payments is a record of all international transactions.

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9
Q

Explain these conflicts between macroeconomic aims.

A

Full employment vs stable prices
Economic growth vs BOP stability
Economic growth vs full employment
Full employment vs BOP stability
Economic growth vs income redistribution

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10
Q

What is the government budget?

A

A financial statement that sets out the income and expenditure of a government in a given year.

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11
Q

What are some reasons for government spending?

A

To reduce market failure - by providing public and merit goods.
To influence economic activity - stimulate level of demand, to increase output and even affect the foreign exchange rate
To promote equity - giving benefits to the less fortunate through social welfare.
To pay interest on money borrowed
To give subsidies
To manage the macroeconomy -fiscal policy

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12
Q

What is the main source of government revenue?

A

Taxation

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13
Q

Why do governments levy taxes?

A
  • to raise revenue to finance gov expenditure
  • to redistribute income
  • to discourage the consumption of demerit goods
  • to correct market failure
  • to discourage imports and protect home industries
  • to reduce pollution
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14
Q

Classifications of taxes

A

Progressive
Regressive
Proportional
Direct
Indirect

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15
Q

Qualities of a good tax

A

Equity - fair tax
Certainty - tax payers are well informed
Convenient to pay
Simple to understand
Flexible
Economical to collect

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16
Q

Define fiscal policy

A

Fiscal policy- decisions on government spending and taxation designed to influence aggregate demand and influence the level of economic activity.

17
Q

Expansionary and contractionary fiscal policy?

A

Expansionary - increasing gov spending and/or reducing taxation BUDGET DEFICIT
Contractionary - reducing gov spending and/or increasing taxation BUDGET SURPLUS

18
Q

What is money supply?

A

The amount of money available to the general public and the banking system in an economy.

19
Q

What is monetary policy?

A

The gov policy that controls money supply - the availability and cost of money - in an economy in order to influence total demand and economic activity.

20
Q

What are the monetary police measures?

A

Interest rates
Foreign exchange rate
Money supply

21
Q

Expansionary and contractionary monetary policy?

A

Expansionary - increasing money supply and/or/by reducing interest rates
Contractionary - reducing money supply and/or/by increasing interest rates

22
Q

What is supply-side policy?

A

measures designed to increase aggregate supply and the quantity/quality of the factors of production
OR
A range of measures designed to increase the level of supply in an economy by enabling markets to perform more efficiently.

23
Q

What are some supply side policy measures?

A

Education and training - workers become more efficient and productive
Labour market reforms - measures to reduce the power of trade unions to have a flexible labour market
Lower direct taxes - reducing income and corporate taxes to increase incentives to work for salaries and profit
Deregulation - removing gov control laws form the market to reduce costs for firms, slow decision making and the entry into the markets.
Improving incentives to work and invest - subsidies and tax holidays
Privatisation - transferring public enterprises to private ownership. Greater competition, efficiency and productivity.

24
Q

What is economic growth?

A

The increase in an economy’s output over a period of time measured by a change in GDP.

25
Q

What is real GDP?

A

GDP adjusted for inflation.

26
Q

What is recession?

A

a period of negative economic growth over a period of two consecutive quarters.

27
Q

What is employment?

A

being involved in a productive activity for which a payment is received

28
Q

What is unemployment?

A

being without a job while willing and able to work

29
Q

The participation rate?

A

The number of people in the labour force as a percentage of the working-age population.

30
Q

The unemployment rate?

A

Unemployed people/people in the labour force

31
Q

How does the claimant count measure unemployment?

A

It counts those who receive unemployment benefits as unemployed though some people may be actively searching for a job and not be receiving unemployment benefits.

32
Q

How does the Labour Force Survey measure unemployment?

A

Counts as unemployed those who don’t have a job but have been actively seeking during the past month.

33
Q

Explain frictional, structural and cyclical unemployment.

A
34
Q

What is deflation?

A

A sustained decrease in the general level of prices in an economy over a period of time.
Technically negative inflation.

35
Q

What is disinflation?

A

A fall in the rate of inflation in an economy.

36
Q

What is the CPI and what does it consist of?

A

Consumer Price Index. It measures changes in general or average prices in an economy over a year.
1. A base year - given a value of 100
2. A basket of products - typical goods and services purchased by a typical household
3. Selection of weights - a measure of importance
4. Construction of a weighted price index - multiplying the weight of each item by the price index of that item.

37
Q

What is bad/malign deflation?

A

Deflation caused by an increase in total demand in an economy.

Economics - IGCSE (6 decks)

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