2.6 intro to macroeconomic objectives Flashcards
(17 cards)
macroeconomic objectives
targets the government set for the UK economy to maximise national income whilst ensuring economic stability
four targets for UK
- stable economic growth at 2%
- low and stable rate of inflation at 2%
- low unemployment
- balance of payment equilibrium on the current account
balance of payments
measurement of the amount of trade between countries
fiscal policy
use of government spending and taxation to influence the whole economy of a country (macroeconomy)
taxation
levy paid on income or added to the cost of goods that are bought
direct taxation
paid directly by a person or business to the government from wages or profit
types of direct taxation
- income tax
- national insurance
- corporation tax
- capital gains tax
indirect taxation
charged on goods and services and is paid by the consumer indirectly to the government
types of indirect taxation
- VAT
- excise duties (fuels, alcohol, etc)
- car tax
- betting tax
- TV licence
multiplier effect
when an initial injection into the economy causes a bigger final increase in national income
expansionary fiscal policy
strategies used by the government to increase AD
contractionary fiscal policy
strategies used by the government to decrease AD
monetary policy
changing the money supply and interest rates to manipulate the economy to achieve the government’s macroeconomic objectives
interest rates
price paid for borrowing money
supply side policies
government policies which seek to increase the productivity and efficiency of the economy
5 main supply side policies
- tax
- benefits
- training
- infrastructure
- grants & subsidies
potential policy conflicts and trade offs
- low unemployment vs low inflation
- healthy economic growth and negative externalities
- how different macroeconomic perspectives influence policy decisions (e.g. left wing vs right wing)
- likely effects of different policies on specific problems (issue of unintended consequences)
