2.6.1 - 2.6.3 Flashcards
Balance of payments equilibrium on current account
In a floating exchange rate the supply of currency will equal the demand for currency,
And the balance for payments is zero.
Therefore if there is a deficit on the current account there will be a surplus on the financial/capital account.
Disposable income
Personal income available after taxation
Net injection
Positive amount where total injections exceed total leakages
Expansionary policy
Uses fiscal measures to increase spending within the economy to encourage economic growth
Contractionary policy
Aims to reduce spending in order to avoid overheating and high inflation rates
Direct taxation
A tax imposed upon a person/property
Indirect tax
A tax imposed upon a transaction
Base rate
The interest rate set by the Bank of England for lending to other banks
Used as a benchmark for interest rates generally
Monetary Policy Committee
MPC
A group of 9 individuals who, independently of government, set short term interest rates
(They meet on a monthly basis)
Deregulation
Reducing rules and regulations which inhibit private enterprise
Privatisation
Selling public sectors to private shareholders to encourage competition
The profit motive should make them become more efficient
Sustainable growth
The realistically attainable growth that a company could maintain without running into problems
Free market policies
Regulations that control the free market to prevent unfair trading as there is little/no government control over a free market
Interventionist
Favouring intervention, especially by a government in its domestic economy or by one estate in the affairs of another
Shocks
Dramatic external changes which affect supply and demand for a good/service
