4.5.4 Flashcards
(11 cards)
what are some measures to reduce fiscal deficits and national debts?
what are some macro economic policies to reduce poverty and inequality?
- increaseing progressive taxes on incomes/ reducing regressive taxes such as VAT
- supply side polcies: improved accesibility to education/ training/ housing perhaps through subsidies
what are some macroeconomic polcies to improve international competitvness?
how are macro economic polcies used to respond to external shocks in economy?
eg: COVID-19
COVID-19 was demand side and supply side shock
* monetary polciy to cut intrest rates and increase spending to bring out of recession
* fiscal polciy: furlow scheme, intrest free loans for firms,
define transfer pricing
a legal technique used by TNCs to shift profits out of the countries where they operate and into tax havens
what are some regulations against transfer pricing?
In the UK, companies which don’t allocate sufficient profits here are challenged by
HMRC and this has led to billions of pounds earnt in taxes.
what are limitations to governments when trying to control TNC activities?
- prefer not to intefere as risk of losing FDI
- Solutions to taxation are extremely difficult as they require worldwide agreement, political difficulties
what are 3 risks that policy makers face?
- inaccurate information
- risks and uncertainties
- inability to control/ for see external shocks
why do polciy makers recieve inaccurate information and why is this a problem?
Short term information, such as GDP figures for the
previous month, are often inaccurate and so may mean that the government is unable to see if there are problems within the economy. Trying to cut down on tax evasion and avoidance is difficult as the government does not have the full picture on the level of avoidance, who it is that is avoiding the tax and the best way to reduce it.
why are there risk and uncertainties for policy makers?
- impossible to predict the future and unintended consequences
- risk managment
why are external shocks a problem for polciy makers?
The government is unable to control and prepare for these external shocks; the best they can hope to do is lessen their impact. Since every situation is different, it may be difficult to know the best method to solve the problem. Policies employed by policy makers may not have their intended impacts and it may undermine current policies in place, for example Brexit has delayed government plans to balance the budget.
