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3. Policies

Macro

TermDefinition
Automatic Stabilisers mechanisms which reduce the impact of changes in the economy on national income
Average Tax Rates the amount of tax paid as a proportion of income (Total Tax/Total Income)
Balanced Budget when government spending equals tax revenue
Budget Deficit when the government spends more money than it recieves
Budget Position on Current Expenditure the flow of cash during one period of time
Budget Position/Fiscal Stance the impact that taxes and government spending has on the future economy
Budget Surplus when the government receives more money than it spends
Capital Government Expenditure government spending on investment goods such as new roads, schools and hospitals, which will be consumed in over a year
Crowding In when government borrowing leads to an increase in private investment
Crowding Out when government borrowing discourages private sector investment or when a government provision of a good or service prevents it being provided by the private sector
Current Government Expenditure spending on goods and services which are consumed and last for a short time
Cyclical Budget Position a temporary budget position, related to the business cycle
Direct Tax taxes imposed on income and paid straight to the government by the individual taxpayer
Discretionary Fiscal Policy deliberate manipulation of government expenditure and taxes to influence the economy; expansionary and deflationary fiscal policy
Fiscal Policy the use of borrowing, government spending and taxation to manipulate the level of AD and improve macroeconomic performance
Fiscal Rules a long-term constraint on fiscal policy by putting numerical limits on the budget
Government Expenditure spending by the government for the provision of goods and services
Indirect Tax tax where the person charged with paying the money to the government is able to pass on the cost to someone else; a tax on consumption that increases costs for producers
Laffer Curve shows that a rise in tax rates does not necessarily lead to a rise in tax revenue due to the impact on incentives and work
Marginal Rate of Tax the rate of tax applied to the next unit of currency of the income, e.g the rate of tax on the next pound earnt in the UK
National Debt the sum of government debts built up over many years
Overall Budget Position an accumulation of deficits and surpluses over time to give the overall budget
Progressive Taxation where those on higher incomes pay ahead of higher marginal rate of tax; those on higher incomes pay a higher percentage of their income on tax
Proportional Taxation the proportion of income paid on the tax remains the same whilst the income of the taxpayer changes; everyone pays the same percentage of their income on tax
Regressive Taxation where the proportion of income paid in tax falls whilst the income of the taxpayer increases; those on lower incomes pay a higher percentage of their income on tax
Structural Budget Position a temporary budget position, related to the business cycle
Asymmetric Inflation Targeting when the central bank only intervenes when inflation is too high, not when it is too low
Interest Rates the price of borrowing money
Liquidity Trap when a change in the supply of money doesn't change the interest rate, which means monetary policy can't be used to influence consumption and investment
Monetary Policy the attempts of the central bank/regulatory authority to control the level of AD by altering base interest rates or the amount of money in the economy
Supply of Money the stock of money in the economy
Quantitative Easing when the central bank buys assets in exchange for money in an attempt to increase the supply of money
Symmetric Inflation Targeting when the central bank intervenes when inflation is too high or too low
Supply-Side Policy government policies aimed at increasing the productive potential of the economy and shifting LRAS to the right.
Created by: 19thomps
 

 



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