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 hyper inflation?
A
Very high inflation that can spiral out of control
7
Q
What is the interventionist approach?
A
- the government is more involved
- tax incentives/subsidies
- monetary and fiscal policies
