macro obj Flashcards
(28 cards)
macro-economic objectives
objectives outlining how gov aim to max level of national outcome, providing Econ growth to raise utility and living standards of the population
macro-economic policies
tools utilised by gov and central bank to achieve macro economic objectives, namely monetary policy, fiscal policy and supply-side policies
stable and sustianbkle econ growth
over last few months Econ growth stopped and been stable. last few months 0
caused by lots of uncertainty in world
low and stable inflation
last 3 years inflation gone up to 12%
now around 2.6% but concerns
target = 2% will create uncertainty
balance of payments equilibrium
uk balance of payments tend to be negative
sports - imports
balanced budget deficits
gov taation and ependiture
last surplus = 25 years ago
uk has neg deficit
income equality
gap between rich + poor has increased - massive gap - esp during covid years
monetary policy
manipulation of the economy using monetary variables using interest rates and control of money supply
how monetary policy works
Bank of England study inflationary trends in economy , looks at - unemployment, consumer confidence, spare capacity, exchange rate index, house prices, Econ growth
forward guidance
communicate planned changes in monetary policy
adv monetary policy
- interest rates have direct, powerful effect on household spending, suggests UK consumers high interest rate elastic
- monetary policy committee is independent from goc , can make free decisions
- interest rates can be adjusted on monthly basis
- immediate effect on confidence
limitations monetary
- liquidity trap - interest rates fail to stimulate economic activity
- difficult to control many obj with one tool-interst rates
- changing interest rates affect exchange rate
- affect some parts of economy more than others
-time lags
fiscal policy
use of taxes, gov spending and gov borrowing by gov to achieve its objective
purpose fiscal
stimulate Econ growth, keep inflation low, stabilise Econ growth, avoid boom and bust cycle
automatic stabilisers
type of fiscal policy designed to offset fluctuations in economic activity through their normal operation without additional authorisation by gov
discretional fiscal policy
fiscal policy that refers to gov decisions that alter gov spending or taxation
adv fiscal policy
-public spending has big impact on AD level, compensate for fallings in other AD components
- if spending on capital items, infrastructure can be improved, can help improve Econ growth
- spending on infrastructure = eternal benefit for rest of economy
-public spending can be targeted to achieve range of Econ objectives
limitations of fiscal
- considerable time lag btw spending and benefits of spending
- trying to promote growth/create jobs = inflationary
- potential ‘trade-off’ between unemployment and inflation( expansionary is inflationary and deflationary equals unemployment
- won’t increase AD
budget deficit
when gov spending is greater than its receipts , therefore has to borrow money to finance difference
fiscal policy
use of taxes, gov spending and gov borrowing by gov to achieve its objectives
supply side policy
gov policy designed to increase prod potential of economy and push long run AS to the right
short run Phillips curve
curve that shows short term there is a trade off between inflation and unemployment
contractionary… policy
leads to fall in aggregate demand
deregulation
process of removing gov controls form market
