Macro Economics Defintions .4 0.0 / 5 ? EconomicsMacroeconomic policyASAQA Created by: SophCreated on: 12-04-16 19:43 Bank of England This is the central bank in the UK economy which is in charge of monetary policy 1 of 24 Money This is an asset that is used as a medium of exchange to purchase goods 2 of 24 Inflation rate target The CPI inflation rate target which is set by the government for the Bank of England to try to achieve is 2% 3 of 24 Monetary Policy Committee These are economists who meet once a month to set Bank rate and interest rate 4 of 24 Bank rate This is the rate of interest the Bank of England pays to commercial banks on their deposits held at the BofE 5 of 24 Money supply This is the stock of money in the economy, made up of cash and bank deposits 6 of 24 Monetary Policy This is a demand-side policy which involves interest rates and the money supply 7 of 24 Contractionary monetary policy This uses higher interst rates to decrease aggregate demand thus shifting the AD curve to the left 8 of 24 Expansionary monetary policy This lowers interest rates in order to increase aggregate demand thus shifting the AD curve to the right 9 of 24 Exchange rate The price of the currency measured in terms of another currency 10 of 24 Fiscal Policy This involves the use of taxation and government spending to achieve the government's policy objectives 11 of 24 Expansionary fiscal policy This decreases T and increases Gx in order to increase aggreage demand 12 of 24 Contractionary fiscal policy This decrease Gx and increases T in order to decrease aggregate demand 13 of 24 Balanced Budget This is when Gx=T 14 of 24 Budget deficit This is when Gx>T 15 of 24 Budget surplus This is when T>Gx 16 of 24 Cyclical budget deficit This is the part of the budget deficit which rises in the trough of the economic cycle and falls in the peak of the cycle 17 of 24 Structural budget deficit This is the part of the budget deficit which is not affected by the economic cycle and does not change 18 of 24 Progressive Taxation As income rises, a larger proportion of income is paid in tax 19 of 24 Proportional Taxation This is when the same proportion of income is paid in tax regardless of income 20 of 24 Regressive Taxation As income rises, a smaller proportion of income is paid in tax 21 of 24 Supply-side policies These policies aim to improve national economic performance by creating more competitive and efficient markets through interventionist policies 22 of 24 Privatisation This involves shifting ownership of state-owned assets into the private sector 23 of 24 Marketisation This involves shifting provision of goods and services from the non-market sector to the market sector 24 of 24
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