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20 Cards in this Set
- Front
- Back
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Monetary policy |
Management of money supply and interest rates by the central bank |
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Fiscal policy |
Using government spending, taxation and borrowing to influence the pattern of economic activity and AD |
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Ex |
The cost of borrowing and the reward for saving |
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Quantitive easing |
Purchase of gilts and other illiquid financial assets as a means of making credit easier to access |
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Expansionary monetary policy |
Using monetary policy to stimulate the economy |
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Deflationary monetary policy |
Using monetary policy to slow down inflation, usually through limiting AD |
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Expansionary fiscal policy |
Using fiscal policy to stimulate the economy |
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Contractionary fiscal policy |
Decreasing use of fiscal tools to reduce inflation usually by raising taxes or cutting spending |
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Budget deficit/ surplus |
The amount by which government spending exceeds tax revenue and vice versa |
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Direct tax |
Tax paid on income or dividends as a percentage of total amount earned |
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Indirect tax |
Tax levied on goods or products rather than wage |
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Demand side policy |
A deliberate manipulation of AD by the government in order to achieve macroeconomic objectives |
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6 effects of reducing interest rates |
-housing prices -effective disposable income of mortgage payers -disposable income of savers -consumer demand for credit -business demand for credit -exchange rates |
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3 limitations of using monetary policy |
-time lags -fixed mortgage rates mean that change isn’t as influential -demand can be interest inelastic eg after 2008 crash people still unwilling to spend |
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3 positives of monetary policy |
-allows government to focus on long run projects -monetary policy can be implemented and changed monthly -interest rates impact every component of AD |
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Three benefits of fiscal policy |
-wide reaching impacts on AD, consumption investment and gov spending -can help AS -can be targeted at specific struggling industries or regions |
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Two limitations of fiscal policy |
-budget deficits -time lag |
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Three things the effectiveness of fiscal policy depends upon |
-confidence -size of the multiplier -what areas spending is on |
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Explain the 1920s financial crisis and explain the implementation of policy |
See pack 9 |
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Explain the 2008 financial crisis and explain the use of policy |
See pack 9 |
