Macroeconomics- Government Policies Flashcards
1
Q
What is a Fiscal policy?
A
The use of government income and expenditure to influence AD, and so to help to achieve the governments macroeconomic objectives
2
Q
What is a Monetary policy?
A
The use of interest rates, exchange rates and the money supply to influence AD and so to help achieve the governments macroeconomic objectives.
3
Q
What is an Expansionary fiscal policy?
A
By cutting tax rates e.g. Income tax will give consumers more disposable income and in turn lead to a rise in AD.
4
Q
What is an expansionary monetary policy?
A
By cutting interest rates on loans (the Bank of England decides this) consumers are encouraged to borrow more money and spend more. Therefore leading to more AD and more jobs.
