Policies Flashcards
Contractionary fiscal policy
The government decreases expenditure (G) or increases taxes.
This will lead to less AD because households are left with less disposable income and firms with less money to invest.
Contractionary monetary policy
Government intervenes in the market to increase the interest rate.
This slows down investment (I) and consumption (C), which reduces AD
Deindustrialisation (Market-Based)
A situation where the share of manufacturing in the economy is actually declining.
Demand-side Policies
Aimed at stimulating the demand side of the economy.
- Fiscal policy (increasing government expenditure and/or decreasing taxes)
- Monetary policy (decreasing interest rates)
Deregulation (Market-Based)
Removing rules and restrictions on production.
Diversification (Market-Based)
Strategy: increasing the variety of goods and services that a country produces and exports.
Wage restraint (Market-Based)
Where the government intervenes in the market to control wage increases. It is an effective tool to fight inflation.
Expansionary Fiscal Policy
The government increases expenditure and/or decreases taxation to stimulate the economy.
Fiscal Stimulus (Interventionist)
The government operates a budget deficit with the intent to stimulate the economy.
Govt Intervention
The government interferes with the market forces that allocate resources in the economy.
Industrialisation (Market-Based)
The process that countries go through when a manufacturing sector grows in size, while at the same time the agricultural sector shrinks, and people move away from rural areas to cities.
Industrial Policies (Interventionist)
Targeted government interventions to drive the development of specific economic sectors.
The goal is to increase productivity of these specific industries and turn them into engines of growth and employment.
Interventionist Policies
Policies where the government takes an activist role in encouraging economic growth and/or development.
Interventionist supply-side policies
Government directly intervening in the economy to increase the quantity or quality of the factors of production.
Labour market flexibility
Removing any impediment that stops the labour market from moving into equilibrium.
Market-oriented Supply-side policies
Policies that work to improve the competitive environment by allowing market forces to operate more freely.
Nationalisation (Market-Based)
The purchase by the government of a firm or an entire industry and bring it into public, rather than private ownership.
Privatisation (Market-Based)
When government owned companies are sold to private owners.
Redistribution Policies (Interventionist)
Measures taken by governments to reallocate income and wealth more equitably in society.
Regulation (Market-Based)
When governments monitor firms and industries to confirm that they are abiding by relevant legislation.
Supply-side policies
Policies aimed at stimulating the supply side of the economy. Attempt to increase the quality and quantity of the factors of production through increasing competition and efficiency in the economy.
Aim to increase the productive capacity and efficiency of the economy, therefore shifting out the supply
Transfer payments (Interventionist)
Government expenditure that is not in exchanges for goods and services.
Often used to redistribute income and support the poor.
Unemployment benefits (Interventionist)
Transfer payments to support individuals when they are out of work.
They ensure everyone has a minimum standard of living and has access to food and housing.
Universal Basic Income (UBI)
Transfer payment that aims to raise lower levels of income by providing a universal payment to every citizen.
