Macroeconomic objectives

Question 1

What are the four main macroeconomic objectives

Answer 1

Sustainable Economic growth
Low and stable inflation
Low unemployment
Balance of payment

Question 2

What are the three other macro objectives

Answer 2

Greater income equality
Protection of the environment
Balanced government budget

Question 3

Limitation of monetary policies

Answer 3

depends on consumer/firm confidence
depends if banks pass on central banks I.R to consumers
depends if banks are willing to loan

Question 4

What are fiscal policies used for?

Answer 4

They’re automatic stabilisers used to dampen the effects of a fluctuating trade cycle.

Question 5

What are direct taxes

Answer 5

Taxes on income that go directly to the government e.g income tax, corporation tax, inheritence tax

Question 6

What are indirect taxes?

Answer 6

Taxes on expenditure e.g VAT

Question 7

Limitation of fiscal policies

Answer 7

Must work alongside monetary policies
There is a time lag in the effects
Increase government debt
May not stimulate AD due to high I.R
Gov have imperfect information

Question 8

define supply side polcies

Answer 8

Aim to improve the long run productive potential of an economy

Question 9

Difference between market led policies and interventionist policies

Answer 9

Market-led: rely on supply and demand to fix imbalances limiting the influence of gov intervention

Interventionist: relies on gov intervention

Question 10

Market led policies examples

Answer 10

increase incentive
promote competition
reform labour market by removing NMW and limiting TU power

Question 11

Interventionist policies examples

Answer 11

increase infrastructure
Improve skills and quality of labour

Question 12

What policies will help improve structural and cyclical unemployment

Answer 12

Structural - supply side policies
Cyclical - demand side policies

Question 13

What is a budget deficit

Answer 13

When government spending is higher than government revenue

Question 14

What are the cons of having a budget deficit, especially towards economic growth

Answer 14

• should be used during the trade cycle when there is recession, must use automatic stabilisers
• depends if there are people to buy the bonds of debts if they’re confident in the economy (low risk)
• depends on the type of spending (capital is necessary for sustainable growth)
• increase

Question 15

What are the three types of spending

Answer 15

Transfer spending - spending directly from government to households (UCS and Pensions)
Capital spending
Current spending

Question 16

What are fiscal policies?

Answer 16

Policies used to change AD via gov spending, tax revenue and gov borrowing

Question 17

What is a direct tax

Answer 17

A tax paid directly to the government

Question 18

What are the UK’s highest tax revenue

Answer 18

(25% or revenue) Income tax, national insurance, VAT and corporation tax

Question 19

Define supply side policies

Answer 19

Aim to increase productive potential of the economy by improving quality and quantity of F.o.P

Question 20

Example of supply side policies

Answer 20

a reduction in benefits and tax

Question 21

What supply side policies promote competition

Answer 21

Privatisation or deregulation
presence of CMA