Policies

Question 1

what are the 5 macro economic policies

Answer 1

Economic growth
low unemployment
balance of trade (exports pay for imports)
stable prices (inflation)
reduce wealth inequality

Question 2

What is fiscal policy concerned with??

Answer 2

Fiscal policy is done by the government and concerns taxation, govt spending, and a borrowing requirement

Question 3

What is taxation and Government expenditure in fiscal policy?

Answer 3

Taxation- raising the funds needed to pay for govt expenditure

Govt expenditure- current expenditure eg schools and hospitals, and capital expenditure (infrastructure)

Question 4

What are budget deficits and surpluses?

Answer 4

Budget deficit= where government expenditure is higher than tax revenue

Budget surplus is the opposite

If they are equal we have a balance budget

Question 5

How and why do you fix a budget deficit??

Answer 5

Budget deficits increase the national debt of the economy and can be reduced by:

• increasing tax (unpopular)
• Austerity (reducing spending)

Question 6

What is expansionary and deflationary fiscal policy

Answer 6

expansionary= increasing AD and employment by running deficit (may cause demand pull inflation depending on AD position)

deflationary= Running a surplus with high taxing and low spending, to slow down economic growth. helps reduce national debt and lower inflation

Question 7

What is monetary policy??

Answer 7

Bank of England changing interest rates to affect exchange rates, aims to achieve similar economic objectives.
- it is less direct than fiscal policy and has more of a time lag effect

Question 8

What is expansionary and deflationary fiscal policy??

Answer 8

Expansionary= lowering interest rates to incentives borrowing (business investment and consumer spending) and reduce saving, this will lower the value of the pound, making our exports cheap and improve our balance of payments CA deficit

Deflationary is the opposite in ever way

Question 9

what are supply side policies??

Answer 9

Policies that look at changing the Aggregate supply of the country
2 types- Free market SSP= polices to increase competitiveness and competition, eg deregulation, lower income tax rates

Interventionist SSP= involve government intervention to overcome market failure eg higher spending on transport and communication

THEY AIM TO INCREASE THE QUANTITY AND QUALITY OF FACTORS OF PRODUCTION- TO SHIFT LRAS TO THE RIGHT