Monetary and Fiscal Policy Exam Q

Question 1

Distinction between capital expenditure, current expenditure, and transfer payments

Question 2

Define interest rates (1 Mark)

Answer 2

(1) cost of borrowing
(1) reward for saving

An interest rate is the cost of borrowing and reward for saving expressed as a percentage of the money saved or borrowed

Question 3

Explain one likely reason why the UK gov abandoned the target of achieving a budget surplus (2 marks)

Answer 3

knowledge (1) - fall in economic growth

• fall in business confidence

Analysis (1) - economy may need gov support for longer to ensure stable growth

• less private sector investment, gov may need to counteract this