TOPIC 2 - Economic policy and financial regulation Flashcards
What are the key macroeconomic objectives?
1) Price stability
2) Balance of payments equilibrium
3) Low unemployment
4) Satsifactory economic growth
What is the purpose of macroeconomic objectives?
See the economy as a whole
What is Consumer Price Index?
A measure of the change in price of goods and services over a period. Ie cost of shopping basket
What is Gross Domestic Product GDP?
Measurement of the country’s overall economic activity. Ie monetary value of goods and services in a year
What is the government’s inflation target?
2% with 1% max divergence either way. Ie 1-3%
The EU has issued a new regulation. What does this mean?
A) choice to adopt the regulation
B) must pass legislation to implement the regulation within 2 years
C) is bound by the regulation in its entirety
D) has the choice how to adopt the regulation’s objective.
C) is bound by the regulation in its entirety
What is the negative consequence of expanding economic growth to reduce unemployment?
Could cause a rise in inflation.
How is inflation measured?
Consumer Price Index
Which UK body and which EU body are responsible for monitoring the financial system for systemic risk and taking steps to reduce it?
UK - Bank of England
EU - European Systemic Risk Board
Which of the following best describes EU Directives?
They:
a) apply only to member states without similar legislation already in place.
b) must be implemented within 12 months of publication.
c) describe the required outcome but leave member states to decide how they are achieved.
d) are automatically binding and member states must implement them exactly as stated in the directive.
c) describe the required outcome but leave member states to decide how they are achieved.
A recession is defined as:
a) two quarters of static GDP growth.
b) two quarters of negative GDP growth.
c) three quarters of rising inflation.
d) three quarters of negative GDP growth
b) two quarters of negative GDP growth.
Which of the following is an example of an indirect tax?
a) National Insurance.
b) Capital gains tax.
c) Income tax.
d) Fuel duty.
d) Fuel duty.
During the recovery and expansion phase of the economic cycle, share prices are most likely to:
a) neither increase nor fall.
b) increase.
c) fall slightly.
d) collapse.
b) increase.
Which of the following is not a European Supervisory Authority (ESA)?
a) European Systemic Risk Board.
b) European Securities and Markets Agency.
c) European Banking Authority.
d) European Insurance and Occupational Pensions Authority.
a) European Systemic Risk Board.
The government takes more in taxation than it spends on public services. This is most likely to result in the economy:
a) contracting.
b) balancing.
c) expanding.
d) remaining stable.
a) contracting.
