Economics Unit 2 - Macroeconomic policy 0.0 / 5 ? Economicsmacroeconomic policyASAQA Created by: anna_richardsCreated on: 05-03-16 20:23 What is fiscal policy? Involves the use of government spending and taxation to affect the level of AD 1 of 21 What does an expansionary fiscal policy do? Increase AD 2 of 21 What does a contractionary fiscal policy do? Decrease AD 3 of 21 What is direct taxation? Levied on income, wealth and profit 4 of 21 What is indirect taxation? What is indirect taxation? 5 of 21 What is progressive taxation? Tax rises as income rises 6 of 21 What is regressive taxation? The tax rate falls as income rises 7 of 21 What is proportional taxation? The tax rate is constant for all income levels 8 of 21 When will a budget deficit occur? Government spending > Tax revenue 9 of 21 If you increase the tax rate will AD rise or fall? Fall 10 of 21 If you increase government spending will AD rise or fall? Rise 11 of 21 What is monetary policy? Involves the use of money supply and interest rates to affect the level of AD 12 of 21 What are interest rates? The reward for saving and the cost of borrowing 13 of 21 What is quantitative easing? Increasing the money supply by electronically creating funds 14 of 21 If you decrease interest rate will AD fall or rise? Rise 15 of 21 If you increase money supply will AD rise or fall? Rise 16 of 21 What are the disadvantages of fiscal and monetary policy? Time lags, Inflationary pressures 17 of 21 What is a supply side policy? Policies that aim to improve the productive potential of an economy 18 of 21 What is production? Value of output of goods and services 19 of 21 What is productivity? A measure of the efficiency of factors of production 20 of 21 What are the disadvantages of supply side policies? Time lags, Risks of government failure, Externalities 21 of 21
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