MACRO - LS12 - Demand-Side Policies (Part 2)

Question 1

examples of fiscal policies

Answer 1

taxes incl. income tax, corporation tax, VAT
gov spending

Question 2

gov budgets

Answer 2

generally have budget deficit - spending larger then revenue
if a surplus then can pay off accumulated debt - all deficits added together

Question 3

another name for accumulated debt

Answer 3

National debt - public sector net debt

Question 4

two key dates in fiscal policy

Answer 4

march - chancellor gives the budget
nov/dec - chancellor gives autumn statement

Question 5

when is the financial statement

Answer 5

starts on 6 april ends on 5 april

Question 6

direct tax

Answer 6

levied on individual or organisation
e.g. income tax, national insurance, corporation tax

Question 7

indirect tax

Answer 7

tax levied on goods/services
e.g. VAT, council duty, excise duty

Question 8

What happens if gov spending is constant but tax revenues fall

Answer 8

• still increase in AD as more disposable income so consumption increases
• but may also increase imports
• if VAT decreases, consumption may increase
• if taxes on companies decrease investment may increase

Question 9

expansionary fiscal policy

Answer 9

• any change that shifts AD outwards
• taxes decrease, spending increases
• loosening of fiscal policy
• when deficit increases or surplus decreases

Question 10

contractionary fiscal policy

Answer 10

• any change that shifts AD inwards
• taxes increases, spending decreases
• tightening of fiscal policy
• when deficit decreases or surplus increases

Question 11

Expansionary monetary policy

Answer 11

• AD shifts to the right
• loosening of monetary policy
• lowering interest rates
• increases quantitative easing

Question 12

Contractionary monetary policy

Answer 12

• AD shifts to the left
• tightening of monetary policy
• raising interest rates
• decreases quantitative easing