Is government action effective?

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What are policy initiatives effected by?
Monthly data is often inaccurate, Time lags in implementing policies, Trade offs, Policy planning and implementation requires skilled politicans, Events intervene
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What problems do politicians face when implementing fiscal policy?
Political considerations, difficulty planning for the long run because they are unlikely to get credit for it, changes in taxation have an immediate effect but changes in government spending take a long time to filter through.
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What are the problems when implementing monetary policy?
As a long time lag can take up to 18 months and it takes time for businesses to plan for expansion, When a reaction does happen it may be too much, In a recession few businesses may be tempted by very low interest rates.
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What are the problems with implementing supply-side policies?
Results can be mixed some may not be equitable, Trade offs to be considered, may not suit al workers, Reducing trade union power may make workers vunerable but please employers, can be hard to alter long term practices and trends
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What is overheating?
Describes the onset and spread of inflation throughout an economy, caused by excess demand.
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What are the best policies to solve rising unemployment due to falling aggregate demand?
Expansionary fiscal and monetary policy
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What type of policy needs to be implemented to solve unemployment caused by structural change?
Supply-side policy
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What is an economic shock?
Events that affect the economy and often come from the outside. The are unexpected and unpredictable.
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What are 'Animal Spirits'?
Phrase used to describe how business people relied on hunches or instinct to make decisions, rather than rational analysis of the facts.
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Why are economic expectations important?
If consumers feel pessimistic they may choose to save, busniesses may be recluctant to invest if they are unhappy about the economy, Employees who expect inflation to rise may demand a pay rise increasing production costs causes inflation to spirall.
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What can policies that stabilise the economy do for businesses?
Reduce business uncertianty, make it easier to plan for the future and encourage innovation and investment.
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What can policies are contractionary do to businesses?
Businesses selling inferior goods experience better sales. While businesses selling normal goods lose out.
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How does a competition policy effect businesses?
Improves international competitiveness
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How do high interest rates effect profitability and international competitiveness?
Pound appreciates, Exporters lose competitiveness and profitability, Businesses that import goods may see reduced costs and improved profitability.
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How do low interest rates effect profitability and international competitiveness?
Pound depreciates, Exporters gain competitiveness and profitability, Businesses that import may see increased costs and less profitability.
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What does G20 do?
Has made attempts at co-ordinating policies
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What does the IMF do?
Helps countries with public sector or trade deficits
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What does the Bank for International Settlements (BIS) do?
Helps co-ordinate new banking rules
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What does the European Central Bank (ECB) do?
May be able to help keep the eurozone economis stable.
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Other cards in this set

Card 2

Front

What problems do politicians face when implementing fiscal policy?

Back

Political considerations, difficulty planning for the long run because they are unlikely to get credit for it, changes in taxation have an immediate effect but changes in government spending take a long time to filter through.

Card 3

Front

What are the problems when implementing monetary policy?

Back

Preview of the front of card 3

Card 4

Front

What are the problems with implementing supply-side policies?

Back

Preview of the front of card 4

Card 5

Front

What is overheating?

Back

Preview of the front of card 5
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