Fiscal Deficit And National Debt

Question 1

Fiscal policy (3)

Answer 1

Reduce gov spending
Don’t house asylum seekers = costs uk £2m a day
May cause social issues in long term

Question 2

Monetary policy (4)

Answer 2

Reduce IR = multiplier effect
BUT = inflation
Reduced FDI
Liquidity traps

Question 3

Increase IR = ER policy (2+)

Answer 3

Increase in hot money flows = people invest in uk banks = more money in economy
More money in banks = loaned out to consumers = spending = 20% VAT revenue

Question 4

What does increase IR assume though (2+)

Answer 4

Banks will lend
Consumers might actually not borrow because initially intrest rates increase

Question 5

Supply side policy (2)

Answer 5

Contractionary = spend less on NHS = biggest burden on fiscal spending
BUT = unintended consequences = ill more often