Econ 2 Macro Growth Etc. Flashcards
(25 cards)
Benefits of growth
- higher living standards
- greater profits for firms
- job creation
- reduced poverty
- greater income equality
- increased gov revenue
- investment opportunities
- better environment
Costs of growth
- inflation
- environmental costs (over exploitation of non renewables)
- income inequality
- financial instability
- wider trade deficit
- opp cost of producing more capital goods to boost productive capacity instead of producing consumer
- human costs ( mental health issues)
Main macro objectives
- growth
- sustainability
- inflation
- low unemployment
- balance of payments
- ## equality
What are trade offs?
When one thing worsens as another improves
Faster growth trade offs
- demand pull inflation
- widen current account deficit
- income inequality
Low unemployment trade offs
- increase real wages
- cost push inflation
Policies to reduce inflation trade offs
- slow growth
- unemployment
Improving debt trade offs
- slow growth
- worsen living standards
What does the Phillips curve show?
The possible inverse non-linear relationship between the unemployment rate and rate of inflation
What is stagflation?
When both unemployment and inflation are high
What do demand side policies do?
They aim to manipulate AD to achieve macro objectives
What is fiscal policy?
Use of gov spending and tax to influence economy
What’s monetary policy?
Use of interest rates and money supply to affect AD
- run by BofE
What’s a direct tax?
A tax on income/wealth
- income tax
- capital gains tax
- corporation tax
What’s an indirect tax?
Tax on spending
- VAT
What’s a progressive tax?
Tax that takes higher proportion from those on higher incomes
What’s a proportional tax?
Tax that takes same proportion of income whatever the level of income
What’s a regressive tax?
Tax that takes lower proportion of income from those on higher incomes
What is public spending?
Spending by Gov to influence AD
What is current spending?
Spending on costs of running public services
- teachers wages
What is capital spending?
Gov investment in economy’s infrastructure
What is the fiscal/budget deficit?
The annual amount the gov borrows to make up gap between its income and spending
- G>T
What’s the fiscal/budget surplus?
G<T
