Government Policy Flashcards
What are direct taxes on?
Income
What are indirect taxes on?
Spending
What are examples of direct taxes?
Income tax, inheritance tax and corporation tax
What are examples of indirect taxes?
Sugar tax, V.A.T and excise duty
Describe fiscal policy
Manipulation of taxation and government spending
What is expansionary fiscal policy?
Cut taxes to stimulate economic growth
What is contractionary fiscal policy?
Raise taxes to stop growth
What is a budget surplus?
Taxes produce more revenue then government spend
What is budget deficit?
Spending is greater than tax revenue
What are the advantages in fiscal policy?
Good for employment, good influence on economic growth
What are the issue with fiscal policy?
Bad for inflation, problem for balance of payments
What is the national debt?
Debt accumulated over decades
Describe aims of Supply side policy
Policies that seek to improve of long-run productive potential in economy
Options to fulfil supply side policy
Deregulation, privatisation, cutting taxes, modification of welfare payments, reformation of trade unions, training and education, investment grants
What factors affect supply side policy?
Education, healthcare, training, raw materials and infrastructure
What policies can firms implement to improve supply side policies?
Investing in new equipment, building new equipment, expanding firms, developing technology, investing in human capital
Describe monetary policy
Manipulation of rate of interest, money supply and exchange rate are influencers level of economic activity
What is the MPC?
Comprises of 9 members, set interest rates and independent from banks
What are the positives are monetary policy?
Increased real GDP, increased employment and increased quality of life
What are the downsides to monetary policy?
Increased inflation and increased propensity to spend more money
What happens when interest rates go up?
Investors move money to chase best deals
Describe hot money
Movement of money around globe to get best deals
What does the acronym SPICED stand for?
Strong Pound Imports Cheap Exports Dear
