policies

Question 1

fiscal policy

Answer 1

a policy that aims to control the economy through the use of government revenue and spending

Question 2

how can fiscal policy be used to achieve gov objectives

Answer 2

RISE IN EG
budget deficit
taxation reduced
spending increased
outcome - greater output and employment perhaps higher inflation and possibly morle exporys

Question 3

benefit of fiscal policy

Answer 3

reduced uemployment
gov can cut taxes/increase spending. There is more demnad for labour. Consumers can spend more, so again more labour is demanded. Also, cutting taxes and increasing spending leads to greater output as consumers can purchase more and firms increase investment

Question 4

Cost of fiscal policy

Answer 4

Cosumers may save rather then spend their income so economy may not grow as expected. Firms and consumers might spend the extra money on imports make the BoP worser

Question 5

oportunity cost of fiscal policy

Answer 5

If the gov spends more on one area e.g. healthcare then it will spend less on another e.g. education

Question 6

What does redistribution involve

Answer 6

direct taxes that are usually progressive taxes (taxes that take a greater percentage of tax the higher the income) or government spending

Question 7

Consequences of measeures to distribute income and wealth

Answer 7

people leave the country - hig tax rates cuase ppl to go abroad where taxes are lower
Lower savings - if the interest rate on savings is heavily taxed people may prefer to spend rather than save

Question 8

pmonetary policy

Answer 8

A policy that aims to grow total supply of an economy to achieve gov objectives in particular price stability

Question 9

How can monetary policy be used to achieve economic objectives

Answer 9

EG - interest rates reduced - increase spending outpu and employment
price stability - interest rate increase - reduced spending so more price stability

Question 10

How can monetray policy affect growth in a fall of interest rate

Answer 10

asuming interest rate falls;
spending and borrowing is cheaper so disposable incomes rise.
increase supply/fall demand for pounds. Exports now cheaper and imports dearer so greater demand for uk G+S leading to more output

Question 11

How can monetary policy affect employment & price stability in a fall of interest rate

Answer 11

employment;
uk exchange rate falls- leads to more demand for uk G+S leading to more employment to meet the demand

price stability ;
UK exchange rate rises - leads to less demand for UK G+S and more demand for cheaper imports so overall demand falls

Question 12

Effects of monetary policy on consumer spending and borrowing in a fall of interest rate

Answer 12

consumer spending;
reteried ppl who rely on income many now spend less as their income falls
those with mortages now pay less interest - more disposable income

borrowing;
more people can afford to buy houses

Question 13

Effects of monetary policy on saving and investment in a fall of interest rate

Answer 13

saving;
if the real rate of interest exceeds the rate of inflation then ppl may save more as the value of inflation is rising

investement;
high taxes will deter firms from investment

Question 14

supply-side policy

Answer 14

any policy that helps to improve a countrys productive potential

Question 15

How can SS policy be used to achieve economic objectives

Answer 15

education and training
better eductaion and training improves workers skills and the quality of labour. This increases productivity and EG and reduces unemployment

Question 16

Costs and benefits of supply side policy

Answer 16

costs
time lags - policies take a long time to become effective and becuase policies take a long time costs can grow beyond estimates

benefits
product and labour market becomes efficiient so output rises to combat increasing demand and thus inflation falls
more output requires more workers. increased productivity leads to higher wages making work more attractive

Question 17

positive and negative externality

Answer 17

positive- the benefit of an economic transaction for a third party e.g. education people becoome more skiled so more productive

negative- the cost of an economic transaction on a third party e.g. passive smoking creates air-pollution inhaled from non-smokers close by harm health

externality - the impact of an economoic transaction on a third party

Question 18

legislation and regulation

Answer 18

legislation - a tax created by gov to control the way individuals or firm behave
regulation - a rule from the gov that firms and or consumers have to follow