Lesson 7 - The Objectives Of Government Policy Flashcards
1
Q
What is equilibrium in an economy?
A
When injections are equal to leakages
2
Q
What is a nanny state?
A
Some people argue that the government gets too involved into an economy
3
Q
What are the two types of government approaches?
A
Lassez-faire and interventionist
4
Q
What is the lassez-faire approach?
A
- smaller, less involved government
- lower taxes leads to increased investment + more disposable income
- leads to more growth
5
Q
Why do some economists like the lassez-faire approach?
A
The government can often get it wrong
6
Q
What is the interventionist approach?
A
- government intervenes
- protects workers and consumers
- avoids inflation + unemployment
7
Q
Describe the credit crunch
A
- banks gave out loans easily to buy houses
- house prices fell
- borrowers couldn’t pay back their loans
- banks had very little liquidity
- countries had to borrow heavily to keep the economy going
8
Q
Describe the impact of the Russia Ukraine war
A
- high oil and gas prices
- price of everything increased (inflation)
- government stepped in to help households
9
Q
What is hyper inflation?
A
Very high inflation that can spiral out of control
