Government macroeconomic intervention (AS Level) Flashcards
Inflation target
the inflation rate a central bank is set to achieve
Fiscal policy
the use of taxation and government spending to influence aggregate demand
Budget
an annual statement in which the government outlines plans for its spending and tax revenue
Budget surplus
government revenue exceeding government expenditure
Budget defecit
government expenditure exceeding government revenue
Balanced budget
government revenue equaling government expenditure
Automatic stabilisers
changed in government spending and taxation that occur to reduce fluctuations in aggregate demand without any alteration in government policy
Cyclical budget deficit
a budget deficit caused by a decline in economic activity
Structural budget deficit
a budget deficit caused by an imbalance between government spending and taxation
Tax base
the coverage of what is taxed
National debt
the total amount of government debt
Specific taxes
taxes that are charged as a set amount per unit
Sin taxes
taxes on products considered harmful to consumers
Direct taxes
taxes on income and wealth
Tax avoidance
the legal bending of the rules of the tax system to pay less tax
Tax evasion
the illegal non-payment or underpayment of a tax
Regressive tax
a tax which takes a larger percentage of the income or wealth of those on low incomes
Proportional tax
a tax which takes the same percentage of the income or wealth of all income groups
Marginal rate of taxation (mrt)
the proportion of extra income taken in tax
Average rate of taxation (art)
the proportion of income that is taxed
Current government spending
government spending on providing goods and services
Capital government spending
government spending on investment
Exhaustive government spending
government spending which makes use of resources
Non-exhaustive government spending
government spending which allows others to decide how resources are used
Expansionary fiscal policy
increases in government spending and cuts in taxes designed to increase aggregate demand
Contractionary fiscal policy
decrease in government spending and increases in taxes designed to reduce growth of aggregate demand
Discretionary fiscal policy
deliberate changes in government spending and taxation
Central bank
bank owned by the government that provides banking services to the government and commercial banks and which operates monetary policy
Commercial banks
banks which aim to make a profit by providing a range of services to firms and households
Monetary policy
the use of interest rates, the money supply. credit regulations and the exchange rate to influence aggregate demand
Interest rates
the price of borrowing money and the reward for saving
Money supply
the total amount of money in a country
Credit regulations
rules affecting bank lending
Target rate for inflation
the rate a central bank is set to achieve
Supply-side policy
government policy tools designed to increase aggregate supply
Infrastructure
buildings and constructions that support society and economic activity, for example bridges, roads and sewage systems
