Government macroeconomic intervention (AS Level)

Question 1

Inflation target

Answer 1

the inflation rate a central bank is set to achieve

Question 2

Fiscal policy

Answer 2

the use of taxation and government spending to influence aggregate demand

Question 3

Budget

Answer 3

an annual statement in which the government outlines plans for its spending and tax revenue

Question 4

Budget surplus

Answer 4

government revenue exceeding government expenditure

Question 5

Budget defecit

Answer 5

government expenditure exceeding government revenue

Question 6

Balanced budget

Answer 6

government revenue equaling government expenditure

Question 7

Automatic stabilisers

Answer 7

changed in government spending and taxation that occur to reduce fluctuations in aggregate demand without any alteration in government policy

Question 8

Cyclical budget deficit

Answer 8

a budget deficit caused by a decline in economic activity

Question 9

Structural budget deficit

Answer 9

a budget deficit caused by an imbalance between government spending and taxation

Question 10

Tax base

Answer 10

the coverage of what is taxed

Question 11

National debt

Answer 11

the total amount of government debt

Question 12

Specific taxes

Answer 12

taxes that are charged as a set amount per unit

Question 13

Sin taxes

Answer 13

taxes on products considered harmful to consumers

Question 14

Direct taxes

Answer 14

taxes on income and wealth

Question 15

Tax avoidance

Answer 15

the legal bending of the rules of the tax system to pay less tax

Question 16

Tax evasion

Answer 16

the illegal non-payment or underpayment of a tax

Question 17

Regressive tax

Answer 17

a tax which takes a larger percentage of the income or wealth of those on low incomes

Question 18

Proportional tax

Answer 18

a tax which takes the same percentage of the income or wealth of all income groups

Question 19

Marginal rate of taxation (mrt)

Answer 19

the proportion of extra income taken in tax

Question 20

Average rate of taxation (art)

Answer 20

the proportion of income that is taxed

Question 21

Current government spending

Answer 21

government spending on providing goods and services

Question 22

Capital government spending

Answer 22

government spending on investment

Question 23

Exhaustive government spending

Answer 23

government spending which makes use of resources

Question 24

Non-exhaustive government spending

Answer 24

government spending which allows others to decide how resources are used

Question 25

Expansionary fiscal policy

Answer 25

increases in government spending and cuts in taxes designed to increase aggregate demand

Question 26

Contractionary fiscal policy

Answer 26

decrease in government spending and increases in taxes designed to reduce growth of aggregate demand

Question 27

Discretionary fiscal policy

Answer 27

deliberate changes in government spending and taxation

Question 28

Central bank

Answer 28

bank owned by the government that provides banking services to the government and commercial banks and which operates monetary policy

Question 29

Commercial banks

Answer 29

banks which aim to make a profit by providing a range of services to firms and households

Question 30

Monetary policy

Answer 30

the use of interest rates, the money supply. credit regulations and the exchange rate to influence aggregate demand

Question 31

Interest rates

Answer 31

the price of borrowing money and the reward for saving

Question 32

Money supply

Answer 32

the total amount of money in a country

Question 33

Credit regulations

Answer 33

rules affecting bank lending

Question 34

Target rate for inflation

Answer 34

the rate a central bank is set to achieve

Question 35

Supply-side policy

Answer 35

government policy tools designed to increase aggregate supply

Question 36

Infrastructure

Answer 36

buildings and constructions that support society and economic activity, for example bridges, roads and sewage systems