Public Finances Flashcards
1
Q
What is the business cycle
A
A theory that virtually all economies are in a cycle moving from -ve economic growth (bust) to +ve economic growth (boom)
2
Q
Cyclical Deficit
A
High public expenditure and low tax revenue ONLY during a recession
3
Q
Structural Deficit
A
High public expenditure and low tax revenue at ANY POINT of the business cycle
4
Q
National Debt
A
The total debt built up by a government over a period of time
5
Q
Effect of budget deficit/national debt on Interest rates
A
- gov borrows lots of money = ^D for borrowed money
-^ in price
== ^interest rates
6
Q
Financial Crowding out
A
-^interest rate == costs firms more to invest
-investment falls
7
Q
A
