Macroeconomic Policy Flashcards
(18 cards)
Explain reasons why the Macro- supply curve might shift to the right
- supply increase per. price
- tech. innov.
-inno. legislation
- tech. innov.
Give reasons why the macro-demand cuve would shift to the right
-inc. tax decrease
Explain the macro-demand curve when aggregrate demand increases
- gen. price level incr.
-real GDP increases
Explain Keysenian policy on how to increase GDP
-Supply given
-supp. curbe given
-more expend. = more GDP
- So incr. Demand
-incr. gov. exp.
-incr. priv. exp.
-multip. effect
Explain the Keynesian budgetary policy AS curve
AS= Agrregrate supply
-Supply potential stays consistent, until
-used up capacity
-then price incre.
Explain the Supply Side’s view on how to increase GDP
-incentivise increased supp.
-thru lowering TAXES
-higher GDP
-incentivise 2 take up labour
Explain the supply side’s opinion on whether lower taxes lead to less gov. rev.
- to SOME extent
-but at first increases (laffer curve)
TRUE or FALSE: significant increase in demand oftentimes results in inflation
-TRUE
‘Keynesian policy is more imprecise than Supply Side Budgetary Policy’ Argue for or against this statement.
FOR
-Hard to reach sweet spot, when rely on dem.
-too little stimulation of AD:
-no effect
-too much stimulation:
-infl. + budg. deficit
\+
LIMIT. budget deficit
stim. comp. 2 invest (long term)
Explain the weaknesses of the supply side fiscal policy
-too little stim. of AD
Explain the benefits of harmonisations
- Lower TCS for FIRMS+ CONS.
-same rules + rights
Explain the costs of harmonisation
- remaining leg diff. limit TC reducation
-diff in interp.
-diff in loval case law - No free movement of leg. rules/ judgments now
-comp. btwn MS rules: may the least TCs win - One size fits all could redu. welfare
Explain what expansionary legal policy is
- use of COURTs, ADM. + REGU. 2 further stimul.
overall dem. 4 goods and serv. during a recession
TRUE or FALSE: capital req. usually reduce during a recession
-true
Describe the fisher equation of exchange
M x V= P x T
-M–> money supply (circulating in economy)
-V–> velocity of money
-P= general price level
-T= number of transactions
-value money flow= value flow of goods
The total amount of money spent in the economy (left side)
is equal to
the total value of all goods and services sold (right side).
-only if T cannot increase further, P will increase
TRUE or FALSE Globalisation is the encgine of economic growth, not the accelarator of economic crises
-FALSE
List potentially risky government failures in response to economic crises
-over regu.
-protectionism
-limit market forces