10 Government macroeconomic intervention

Question 1

Tinbergen’s rule

Answer 1

for every policy aim there must be at least one policy measure

Question 2

Inflation target

Answer 2

the rate a central bank is set to achieve

Question 3

Phillips curve

Answer 3

a curve that shows the relationship between the unemployment rate and the inflation rate over a period of time

Question 4

Expectations

Answer 4

augmented Phillips curve a diagram that shows that while there may be a trade-off between unemployment and inflation in the short run, there is no trade-off in the long run

Question 5

Reflationary fiscal or monetary policy measures

Answer 5

policy measures designed to increase aggregate demand

Question 6

Government macroeconomic failure

Answer 6

government intervention reducing rather than increasing economic performance

Question 7

Counter

Answer 7

cyclically-going against the fluctuations in economic activity

Question 8

Laffer curve

Answer 8

a curve showing tax revenue rising at first as the tax rate is increasing and then falling beyond a certain rate

Question 9

Automatic Stabilisers

Answer 9

Forms of government spending and taxation that change automatically to offset fluctuations in economic activity