T4 POLICIES Flashcards
what is fiscal policy
managed by the government and involves using tax and public expenditure to influence the economy.
what are the two types of fiscal policy
expansionary and contractionary
what is expansionary(loose) fiscal policy
involves increasing public expenditure and decreasing tax.
what is contractionary(tight) fiscal policy
involves decreasing public expenditure and increasing tax.
what is meant by discretionary fiscal policy
when a government uses their discretion, their ability to make decisions, in order to choose the best policy and make changes. They are actively intervening.
what are automatic stabilisers
Automatic stabilisers occur when tax and public expenditure change without government intervention, in order to keep the economy stable.
what is an example of automatic stabilisers during a boom
A reduction in spending on benefits due to reduced unemployment
What is monetary policy
when the Central bank use the base interest rate or changes in the money supply (QE) to influence the economy
What are the two types of monetary policy ?
expansionary and contractionary, same two types as fiscal
What type of policy are monetary and fiscal policies
They are both demand-side policies as they aim to influence aggregate demand.
What are supply side policies
Supply-side policies are government policies which aim to increase aggregate supply.
What are the two types of supply-side policy ?
The two types of supply-side policy are interventionist and market-based
What is a real world example of interventionist supply side policy
The South Korean government increased infrastructure spending in 1970 by giving out raw materials to villages for free.
In Madagascar in 2001, the government increased education spending to build new schools and train more teachers.
What is interventionist supply side policy
when the government is actively involved in increasing aggregate supply.
what is market based supply side policy
Market-based supply-side policy is when the government decides to reduce intervention and let the market operate
what are exchange rate policies
policies which aim to influence a country’s exchange rate.
what are the two exchange rate policies a government can use to appreciate its exchange rate
Increase the base interest rate
Sell domestic currency to buy foreign currency
What are the different exchange rate policies
Policymakers can influence the exchange rate by changing the base interest rate or through foreign currency transactions.
What are direct controls
are any policies which work outside of market forces, which directly intervene to tightly control parts of an economy.
For example implementing a minimum wage
