Topic 2 Flashcards
What is disinflation?
A fall in the rate of inflation, prices are still rising but less quickly than they were.
What is deflation?
A general fall in the price of goods and services. In other words, the inflation rate is below zero percent a negative inflation rate.
What are the 4 macroeconomic objectives?
> Price stability
Low unemployment
Balance of payments equilibrium
Satisfactory economic growth
What is Recession?
A significant decline in economic activity.
What does GDP stand for and what does it measure?
Gross Domestic Product and it measures a country’s economic activity.
The government has set an official direct target which is to keep inflation as measured by the consumer price index at an average annual rate of _____% which a maximum divergence of _____%. This method used to control inflation is by manipulating interests rates.
Annual rate of 2% with a max divergence of 1%
What is Consumer Price Index?
It measures the change in price(inflation) in consumer’s goods and services over a period of time.
Which committee decides the rate of interest at which the Bank of England will lend to banks and other financial institutions?
Monetary Policy Committee
Who gives instructions to the Bank of England regarding its monetary policy in extreme circumstances?
The Treasury
What is Bank rate?
The rate at which the Bank of England lends to Financial Institutions
What is Fiscal Policy?
The adjustment of taxation and public spending to achieve the government’s macroeconomic objectives.
What is direct taxes?
Apply to individuals and their assets. E.g. Income tax, capital gains tax, inheritance tax.
What is indirect tax?
Applied to goods and services at the time they are purchased. E.g. VAT, stamp duty.
