Topic 2 - Economic Policy & Financial Regulation Flashcards
Disinflation & Deflation
Disinflation - a fall in inflation I.e. prices are increasing slower
Deflation - a general fall in prices or good and services - negative inflation rate
Macroeconomic Objectives
- Price stability
- Low Unemployment
- Balance of payments equilibrium
- Satisfactory economic growth
Recession
A decline in economic activity over a period of time usually 2 quarters
Gross Domestic Product (GDP)
Measurement of country’s overall economic activity - monetary value
Economic activity
1- Recession
2- Recovery
3- Boom
4- slowdown
Consumer Price Index
Measurement of the change in price of good and services over period of time
Monetary Policy
Control supply of money by increasing/decreasing interest rates to manage inflation
Bank Rate
The rate Bank of England use to lend to other financial institutions
Inflation target
The level of inflation economists judge to keep economy functioning efficiently
Fiscal Policy
Adjustment of taxation and public spending in order to achieve macroeconomic objective
Direct taxes
Apply to individual assets e.g. income, capital gains
Indirect Taxes
Applied to good and services once purchased e.g. VAT, stamp duty
Balanced budget
Amount taken in tax is put back into public spending
Budget surplus
Amount taken in tax is greater than amount put back into public spending
Budget deficit
Public spending is greater than amount taken in taxation
