U4 AOS1 - Aggregate Demand-Side Policy Flashcards
The phrase aggregate demand-side policies can refer to:
Budgetary or Monetary Policy
The RBA’s Charter Goals:
Stability of the Australian currency
Maintenance of Full Employment
The wellbeing and prosperity of the Australian people
How would Conventional Monetary Policy (Open market operations) be used to increase the target cash rate?
Selling government securities.
How would Conventional Monetary Policy (Open market operations) be used to decrease the target cash rate?
Buying government securities.
An unconventional monetary policy tool where the RBA can warn the general public about potential future changes to monetary policy.
Forward guidance
The four transmission mechanisms are:
Savings and investment
Cash flow
Asset prices and wealth
Exchange rate
The transmission mechanism which outlines how changes in monetary policy impact household discretionary income
Cash flow channel
The transmission mechanism which explains the impact of changes in monetary policy on the reward for saving or incentive to invest
Savings and investment.
The transmission mechanism which explains how changes in monetary policy will impact how wealthy someone feels.
Asset Prices and Wealth
The transmission mechanism which explores how monetary policy impacts inflow or outflow of capital and therefore demand and supply of the Australian dollar
Exchange rate
The stance of monetary policy if the cash rate is set high to slow the economy
Contractionary
The stance of monetary policy if the cash rate is set low to stimulate the economy
Expansionary
Which domestic goal does the RBA target before any other?
The Goal of Low Inflation
Monetary policy being a blunt instrument is a
Weakness of monetary policy
Monetary Policies short implementation lag is a
Strength of Monetary Policy
Monetary Policies long impact lag is a
Weakness of monetary policy
The 3 sources of government revenue
Direct tax, indirect tax and non-tax government revenue
RBA’s independence from the government is an example of
A strength of monetary policy
Tax systems can be ____________, (higher the more someone earns) _______________ (higher the less someone earns), or _______________ (always the same)
Progressive, regressive or proportional
The three main types of government expenses
Current, capital expenditure and transfer payments
The three possible budget outcomes.
Balanced, surplus, deficit
A budget balance which excludes any revenues which do not have a direct impact on the economy in the current period
Underlying budget balance
3 ways of financing a budget deficit
Selling bonds to the RBA
Selling bonds to overseas
Selling bonds to the private sector
3 ways a surplus can be utilised are
Repay debt
Save with the RBA
Add to investment balances in special savings funds
A budget deficit is likely to ____________ the level of public debt
Increase
Automatic stabilisers refer to:
The built-in components of budgetary policy which work countercyclically to correct the level of economic activity
What two things are considered automatic stabilisers?
Tax revenue and welfare outlays.
Discretionary stabilisers are:
The deliberate changes to budgetary policy.
The stance of a surplus budget is
Contractionary
The stance of a deficit budget is
Expansionary
The ability to target specific sectors is a
Strength of budgetary policy
A long implementation lag and political hurdles are
Weaknesses of budgetary policy
A short impact lag is a
Strength of budgetary policy.
