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B.ECO FLEX > Lecture 09 # Role of Government > Flashcards

Lecture 09 # Role of Government Flashcards

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1
Q
  1. What are the key macroeconomic policies in Pakistan?
A
  1. Fiscal Policy
  2. Monetary Policy
  3. Exchange Rate Policy
  4. Trade Policy
  5. Industrial Policy
  6. Social Policies
  7. Regulatory Policies.
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2
Q
  1. What is public finance?
A

Public finance is the management of government revenue, expenditure, and debt, affecting the economy.

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3
Q
  1. What are the objectives of macroeconomic policy?
A
  1. Full employment
  2. Price stability
  3. Economic growth
  4. Balance of payments stability
  5. Stable exchange rates.
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4
Q
  1. What are the main categories of government receipts?
A
  1. Tax revenue
  2. Non-tax revenue
  3. Grants and aids.
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5
Q
  1. Define committed government expenditure.
A

Mandatory spending required by law, such as social security payments.

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6
Q
  1. What is a cyclic deficit?
A

Budget deficits influenced by economic cycles, often worsening during downturns.

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7
Q
  1. Define discretionary government expenditure.
A

Non-mandatory spending, determined annually by policymakers, such as funding for education.

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8
Q
  1. What is a structural deficit?
A

A budget deficit that persists even during economic growth, due to policy decisions.

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9
Q
  1. What are the functions of taxation?
A
  1. Revenue generation
  2. Wealth redistribution
  3. Economic stabilization
  4. Behavior modification
  5. Resource allocation
  6. Public policy implementation.
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10
Q
  1. What are the qualities of a good tax system?
A

Equity, certainty, convenience, economic efficiency, adequacy.

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11
Q
  1. What is a proportional tax?
A

A tax where the rate is constant, regardless of income level.

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11
Q
  1. What is a progressive tax?
A

A tax where the rate increases as income rises.

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12
Q
  1. What is a regressive tax?
A

A tax where the rate decreases as income rises, such as sales tax.

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13
Q
  1. What are direct taxes?
A

Taxes directly imposed on individuals or businesses, like income and corporate taxes.

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14
Q
  1. What are indirect taxes?
A

Taxes on goods and services, where the burden can be shifted to others, like VAT or sales tax.

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15
Q
  1. What is unemployment?
A

The situation where individuals who are able and willing to work at the current wage rate cannot find employment.

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16
Q
  1. What are the types of unemployment?
A
  1. Frictional
  2. Structural
  3. Cyclical
  4. Seasonal
  5. Voluntary
  6. Classical unemployment.
17
Q
  1. What is inflation?
A

A sustained increase in the general price level of goods and services, reducing purchasing power.

18
Q
  1. What are the consequences of unemployment?
A
  1. Loss of income
  2. Reduced demand for goods and services 3. Increased social welfare costs
  3. Slower economic growth.
19
Q
  1. What is cost-push inflation?
A

Inflation resulting from increased production costs that cause producers to raise prices.

20
Q
  1. What is demand-pull inflation?
A

Inflation caused by an excess of demand over supply.

20
Q
  1. What is stagflation?
A

An economic condition of stagnant growth, high unemployment, and high inflation, often due to supply shocks like rising oil prices.

21
Q
  1. What is hyperinflation?
A

Extremely high inflation, often exceeding 50% per month, leading to a drastic loss in currency value.

22
Q
  1. What are the causes of inflation?
A
  1. Increased demand
  2. Supply shortages
  3. Rising production costs
  4. Excessive money supply
  5. Exchange rate fluctuations.
23
Q
  1. How is inflation measured?
A

Through the Consumer Price Index (CPI), Producer Price Index (PPI), and GDP Deflator.

24
Q
  1. What is the policy response to inflation?
A

Central banks may raise interest rates, governments may reduce spending or increase taxes, and supply-side policies may focus on productivity improvements.

25
Q
  1. What is the Quantity Theory of Money?
A

It states that the price level is directly proportional to the money supply, expressed as MV = PQ.

26
Q
  1. What does the Philips Curve illustrate in the short run?
A

A trade-off between inflation and unemployment.

27
Q
  1. What happens to the Philips Curve in the long run?
A

The trade-off diminishes as unemployment returns to its natural rate and inflation is influenced by other factors.

28
Q
  1. What is contractionary fiscal policy?
A

Reducing government spending or increasing taxes to control inflation.

28
Q
  1. What is fiscal policy?
A

Government use of taxation and spending to influence the economy.

29
Q
  1. What is expansionary fiscal policy?
A

Increasing government spending or cutting taxes to boost economic activity.

30
Q
  1. What are the objectives of fiscal policy?
A
  1. Economic growth
  2. Price stability
  3. Full employment
  4. Income redistribution.
31
Q
  1. What is the effect of fiscal policy on aggregate demand?
A

Expansionary fiscal policy increases it, while contractionary decreases it.

32
Q
  1. How does fiscal policy affect unemployment?
A

Expansionary policy lowers it, contractionary may raise it.

33
Q
  1. What is the crowding-out effect?
A

When government borrowing leads to higher interest rates, reducing private investment.

34
Q
  1. What is monetary policy?
A

Central bank actions to control the money supply, interest rates, and credit conditions.

35
Q
  1. What are the objectives of monetary policy?
A
  1. Price stability
  2. Full employment
  3. Economic growth
  4. Currency stability.
36
Q
  1. What is the effect of rising interest rates?
A
  1. Increased borrowing costs
  2. Slower consumer spending
  3. Stronger domestic currency.
37
Q
  1. What is supply-side policy?
A

Measures aimed at increasing productivity and long-term economic growth.

38
Q
  1. What are key aspects of supply-side policies?
A
  1. Tax reforms
  2. Deregulation
  3. Labor market flexibility
  4. Infrastructure investment
  5. Innovation promotion.
39
Q
  1. What are the objectives of supply-side policies?
A
  1. Promote economic growth
  2. Reduce unemployment
  3. Control inflation by improving efficiency.

B.ECO FLEX (10 decks)

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