macroeconomic objectives and policies

Question 1

what are the seven macroeconomic objectives

Answer 1

a) Economic growth
b) Low unemployment
c) Low and stable rate of inflation
d) Balance of payments equilibrium on current account
e) Balanced government budget
f) Protection of the environment
g) Greater income equality

Question 2

types of demand side policies

Answer 2

monetary and fiscal policy

Question 3

types of fiscal policy

Answer 3

expansionary and contractionary

Question 4

what is expansionary fiscal policy examples

Answer 4

increase government spending
reduce tax rates
causes budget deficit usually

Question 5

problems of high tax revenue and what curve shows this

Answer 5

disincentivises work, Laffer curve which is a upside down U curve with tax rate on x axis and tax revenue on Y axis

Question 6

problem of large budget deficit

Answer 6

must be payed for by public sector borrowing - debt

potential high inflation due to too much gov spending
the high inflation may be countered by high interest rates which would hinder investment and growth

too high debt may cause interests on borrowing in future to increase which will hinder future growth

future taxpayers will have very high taxes to get the deficit back

Question 7

what is monetary policy

Answer 7

interest rates
QE
exchange rates

Question 8

effects of increase in interest rates

Answer 8

less borrowing
less investment
decrease in exports
increase in imports

Question 9

how do interest rates affect exchange rate

Answer 9

high interest rate - increase demand for pound - appreciation in exchange rate

Question 10

trade offs

Answer 10

unemployment and inflation
economic growth and environmental protection
economic growth and inflation
inflation and BoP