Topic 2

Question 0

Fiscal policy is..

Answer 0

The process by which the gov attempt to influence the level of eco activity through gov spending, taxation and borrowing

Question 1

4 Objective of govmt policy are

Answer 1

Price stability
Low unemploymet
Bal of pymts equalibrium
Eco growth

Question 2

Expansion fiscal policy

Answer 2

Cutting taxes

Inc public spendng

Question 3

Contractory fiscal policy…

Answer 3

Reduct spending, inc tax

Reduced demand should reduct inflation and reduce current accoutn deficit

Question 4

Exports and imports have what affect on curr acc?

Answer 4

Exports are credit
Imports are debits
So deficit caused by importing more than exporting

Question 5

Deficit can be correct by discouraging imports, by doing the following…

Answer 5

Increase int rate to entice foriegn investment
Imposing tarrifs or limits on quantities-protectionism
Exchange controls- pegging rate

Question 6

When the MPC changes rates what actually changes

Answer 6

Rate on14 day gilt repos

Question 7

4 types of inflation measurements…

Answer 7

RPI- with mortage
PRIX- without mortgage pymts
National average earnings
CPI- replaced rpix in dec 2003, similar but EU harmonised

Question 8

How does bank of e reduce inflation?

Answer 8

Inc int rate, less spending= lower prices

Question 9

Nominal int rate is

Answer 9

Rate actually paid or charged

Question 10

Calc for true rate of return

Answer 10

Nom rate/infl rate -1

Eg 1.05/1.03=1.0194 (1.94%)

Question 11

Amount of money in circ must reflect…

Answer 11

The real value of good or services, or inflation ensues

Ie to much money in circ drives up prices

Question 12

2 money suppliy measures…

Answer 12

M0 - narrow money, notes and coins and money in BoE accounts

M4 - broad money, raised by bank and build soc borrowing- BoE can influene this by increasing int rate

Question 13

5 levels of reg

Answer 13

EU
our gov
FSA
Banks
FOS- check for update

Question 14

Cassis de dijon judgement is

Answer 14

1979 euro court of justice, mutual recognition of national rules, prohibits any discrimination on grounds of nationility

Moved us towards ‘approximation’ of national laws

Question 15

Single euro act 1987 defined internal market withut internal frontiers and specified 4 freedoms….

Answer 15

Movmt of persons, goods, capital and to provide services in other states

Question 16

2 most commen types of laws adopted by euro parliment and the coucil of ministers

Answer 16

Regulations- general application and directly applicable

Directives, must be acheive by specifc timescales, and the result is whats impirtant

Question 17

2 main functions of gov in fin markets

Answer 17

Managing the econmy and regulation