Macroeconomic Objectives+Policies -unit 4 Flashcards
What is sustainable growth
Ability to meet the needs of the current generation without compromising the needs of future generations
Why does a country want low and stable inflation
Increases international competitiveness
How do countries redistribute income
Welfare payments and taxes
What are the components of AD
Comsumption+investment+government spending+(exports-imports)
What is monetary policy
The use of interest rates, money supply and exchange rates to influence economic activity
What is the UK inflation target
2%
Why do banks change their interest rates
To effect inflation
High interest rates = low inflation
Quantative easing is when the central bank buys government bonds and corporate bonds from commercial banks. But what affects does this have
Increases their deposits allowing them to lend more money, which therefore incentifies investment
What is fiscal policy
Government expenditure and taxation to influence economic activity
What do supply side policies aim to do
Increase aggregate supply
When will supply side polices be useless
When AD is low
What specific markets do supply side policies target
Labour
Product
Capital
Name some labour market induced supply side policies
Reduction in trade union power
Reduction in unemployment benefits
Improvement in human capital
Reduction in income taxes
Name some supply side policies targeted at the product market
Privatisation/deregulation/contracting out
Trade liberalisation
Promotion of new firms
What is trade liberalisation
Removal or reduction in trade barriers and policies which allow free capital flow
