Government Policies
Resumen
When an economy slows sharply, a government has real choices to make, not just hope for the best. It can spend more or tax less. Its central bank can make borrowing cheaper. It can try to make the economy itself more productive over the long run. Each choice is a different lever with a different name, a different speed of effect, and a different set of side effects.
In this lesson you will learn the three main levers a government has for managing the macroeconomy: fiscal policy (tax and spending), monetary policy (interest rates), and supply-side policy (raising the economy's underlying capacity), alongside the direct controls government can place on business behaviour. You will practise matching the right instrument to a stated macroeconomic objective and explaining, precisely, the chain of cause and effect that connects a policy change to its outcome.
Objetivos
- Fiscal policy - government revenue and government expenditure: definition of fiscal policy, government revenue (direct and indirect taxes), government expenditure (main areas of focus), fiscal deficits and fiscal surpluses, impact of a fiscal deficit and fiscal surplus, the impact of fiscal policy on macroeconomic objectives
- Monetary policy - focused on interest rate changes: definition of monetary policy, definition of interest rates, central banks role in setting interest rates, impact of changes in interest rates on macroeconomic objectives (the mechanism by which a change in interest rates affects consumers and businesses, awareness of asset purchasing used by central banks)
- Supply-side policy: definition, supply-side policy and its impact on productivity and total output, the impact of supply-side policies on macroeconomic objectives (privatisation, deregulation, education and training, policies to boost regions with high unemployment, infrastructure spending, lower business taxes to stimulate investment, lower income tax rates to encourage working)
- Government controls: advantages and disadvantages of regulation, legislation, fines, pollution permits
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- Which of the following is an instrument of fiscal policy? A) The interest rate B) Government spending C) The exchange rate D) Quantitative easing Answer: B
- A central bank raises interest rates. Which of the following is the most likely effect? A) Consumer borrowing increases B) Aggregate demand falls C) The currency depreciates D) Government spending automatically rises Answer: B
- Which of the following is a supply-side policy? A) A cut in interest rates B) An increase in government spending on welfare benefits C) Investment in education and training to raise workforce skills D) A rise in indirect taxation Answer: C
- Expansionary fiscal policy involves: A) Raising taxation and cutting government spending B) Cutting taxation and/or raising government spending C) Raising interest rates D) Increasing pollution permits Answer: B
- Which best describes why a fiscal expansion and a monetary tightening can offset each other? A) They both raise interest rates B) They push aggregate demand in opposite directions at the same time C) They are always set by the same body D) They only affect the current account Answer: B
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Libros Recomendados
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Contrast expansionary monetary policy and contractionary monetary policy
"Principles of Economics 2e: Monetary Policy and Economic Outcomes" by OpenStax, OpenStax, Rice University, licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Source: https://openstax.org/books/principles-economics-2e/pages/28-4-monetary-policy-and-economic-outcomes. Access for free at https://openstax.org/books/principles-economics-2e/pages/1-introduction
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Shifts in Aggregate Demand
Explain how imports influence aggregate demand
"Principles of Economics 2e: Shifts in Aggregate Demand" by OpenStax, OpenStax, Rice University, licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). Source: https://openstax.org/books/principles-economics-2e/pages/24-4-shifts-in-aggregate-demand. Access for free at https://openstax.org/books/principles-economics-2e/pages/1-introduction
Publicados por otras organizaciones con licencias abiertas y citados como piden. Los enlaces abren sus sitios.
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