macro policies

Question 1

Describe fiscal policy

Answer 1

Government spending, taxation, borrowing, affects economy

Question 2

Define budget deficit

Answer 2

Government spends more than it receives in tax

Question 3

Define budget surplus

Answer 3

Government receives more than it spends

Question 4

What is the traditional timing for fiscal policy announcements in the UK?

Answer 4

Autumn statement in November, Budget in March

Question 5

Explain Public Sector Net Cash Requirement (PSNCR)

Answer 5

Borrowing of the public sector, occurs in budget deficit

Question 6

How does a budget deficit affect aggregate demand?

Answer 6

Increases aggregate demand, expansionary fiscal policy

Question 6

Do budget deficits require borrowing?

Answer 6

Yes, government borrows money

Question 7

How can a budget deficit occur?

Answer 7

Increase in government spending, lowering of taxes

Question 8

Explain the impact of fiscal policy on macroeconomic indicators

Answer 8

Affects everyone in the economy, influences indicators

Question 9

Describe the relationship between budget surplus and national debt

Answer 9

Negative PSNCR, money given back to national debt

Question 10

What is an expansionary fiscal policy?

Answer 10

Increase in government spending, lowering of taxes

Question 11

How does fiscal policy relate to aggregate demand

Answer 11

Demand side policy, affects level of aggregate demand

Question 12

expansionary fiscal policy

Answer 12

Government budget deficit, increases aggregate demand

Question 13

Describe the effect of a budget surplus on aggregate demand

Answer 13

Reduces aggregate demand, shifts AD curve left

Question 14

Explain the role of fiscal policy in the economy

Answer 14

Improves macroeconomic performance, distributes income and wealth, corrects market failure

Question 15

How does deflationary fiscal policy affect aggregate demand

Answer 15

Reduces aggregate demand, shifts AD curve left

Question 16

What is the multiplier effect in fiscal policy

Answer 16

Direct effect on aggregate demand, amplifies economic impact

Question 17

Describe automatic stabilisers

Answer 17

Expenditures that rise in recession, fall in boom

Question 18

Explain the relationship between fiscal policy and the output gap

Answer 18

Expansionary for negative gap, deflationary for positive gap

Question 18

How does demand management use fiscal policy

Answer 18

influences aggregate demand, GDP, macroeconomic objectives

Question 19

Define discretionary fiscal policy

Answer 19

Deliberate use of tax and spending, not relying on automatic stabilisers

Question 20

What is the trend rate of GDP

Answer 20

Potential GDP, target for fiscal policy

Question 21

Describe the impact of government spending on aggregate demand

Answer 21

Increases aggregate demand, shifts AD curve right

Question 22

Explain the significance of fiscal policy diagrams

Answer 22

Visual representation of fiscal policy effects, multiplier effect

Question 23

How can fiscal policy correct market failure

Answer 23

Intervenes in inefficient markets, reallocates resources

Question 24

What happens during a negative output gap

Answer 24

Expansionary fiscal policy, budget deficit

Question 25

What occurs during a positive output gap

Answer 25

Deflationary fiscal policy, budget surplus

Question 26

Describe the relationship between taxation and aggregate demand

Answer 26

Increase in taxation reduces aggregate demand, shifts AD curve left

Question 27

Describe the impact of recession on unemployment and government benefits

Answer 27

Increased unemployment, higher social security payouts

Question 28

Explain how government benefits affect aggregate demand during a recession

Answer 28

AD falls less, people spend benefits on consumption

Question 29

Define the government's fiscal policy response during an economic boom

Answer 29

Reduced spending, increased tax revenues

Question 30

How does increased taxation affect consumer spending?

Answer 30

Less spending, some income goes to government

Question 31

What are the trade-offs in achieving macroeconomic objectives through fiscal policy?

Answer 31

Inflation vs growth, unemployment vs inflation

Question 32

Do expanding fiscal policies always lead to positive economic outcomes?

Answer 32

Causes inflation, potential negative effects

Question 33

Explain the relationship between fiscal policy and balance of payments

Answer 33

Lower prices cause unemployment, tight fiscal policy

Question 34

How does tightening fiscal policy impact economic growth?

Answer 34

Slows growth, causes unemployment

Question 35

What is a consequence of spending money to create jobs?

Answer 35

Causes inflation

Question 36

expansionary (loosening) monetary policies examples

Answer 36

Lowering interest rates increasing quantitive easing

Question 37

contractionary (tightening) monetary policy examples

Answer 37

raising interest rates reducing quantitive easing