Role of the Government

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Aggregate Demand
Total demand in the economy (expenditure + exports + investment + government spending)
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Aggregate supply
Total supply in the economy
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Balanced budget
Government income = Government expenditure
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Budget Deficit
Government expenditure is greater than its income for that year
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Budget surplus
Government income is great than expenditure
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Direct tax
Taxation on income and wealth (income tax, inheritance tax, capital gains tax)
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Fiscal Policy
Use of taxation and government spending to influence the economy
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Indirect taxes
Taxation on spending (VAT, taffifs)
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Interest Rates
Cost of borrowing or reward for saving money, Base rate set by the central bank.
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Monetary Policy
Use of interest rates or the money supply to influence the economy
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Progressive taxes
Taking a higher percentage of income as tax from higher earners. Usually implemented through direct tax
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Regressive taxes
Taking a higher percentage of income from lower income. Usually associated with indirect taxes
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Taxation
Form of income for the government through direct and indirect charges.
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Other cards in this set

Card 2

Front

Total supply in the economy

Back

Aggregate supply

Card 3

Front

Government income = Government expenditure

Back

Preview of the back of card 3

Card 4

Front

Government expenditure is greater than its income for that year

Back

Preview of the back of card 4

Card 5

Front

Government income is great than expenditure

Back

Preview of the back of card 5
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