Government macroeconomic intervention

Question 1

Fiscal policy

Answer 1

The use of public revenue and expenditure to influence the level of aggregate demand in an economy

Question 2

Government budget

Answer 2

A financial statement that outlines a government’s estimated revenue and planned expenditure for a given period of time

Question 3

National debt

Answer 3

Accumulation of all the government debt during a given period of time.

Question 4

Study tip

Answer 4

It is important to understand that at a time when the size of a budget deficit is falling,
the size of the national debt will still be rising because as long as there is a budget
deficit, a government will be spending more than it is receiving. It is important also
to understand that a budget surplus does not necessarily mean a reduced national
debt. A government would need to choose to use the budget surplus for the purpose of reducing the size of the national debt.

Question 5

Direct taxes

Answer 5

Taxes imposed on the incomes of individuals and firms

Question 6

Indirect tax

Answer 6

Taxes on consumer expenditure in an economy

Question 7

Monetary policy

Answer 7

Use of interest rates and money supply to influence the level of aggregate demand in an economy

Question 8

Expansionary monetary policy

Answer 8

One that causes aggregate demand in an economy to increase by increasing money supply/reducing interest rates