economic policy

economic policy definition

what the state does do/in/for the economic realm

political economy definition (S&S)

how politics and the economy interact - use economic methodology to analyze political phenomena

what GDP measures (NOT the definition) (2)

1. economic performance
2. access to goods and services

criticism of GDP

doesn't consider enough/considers too little - not a perfect representation of economy

definition of unemployment

people of working age who are not employed but available & looking for work

3 factors influencing the unemployment level

1. economic growth
2. technological development
3. wages

inflation definition

rise in prices of goods and services
influenced by numerous factors (please think back to econ revision)

fiscal policy definition

revenue collection and public spending

3 things fiscal policy influences

1. income, wealth, & their distribution
2. savings and investment
3. aggregate demand

monetary policy definition

money supply and interest rates, CB policies

2 basic trade-offs of monetary policy

1. higher interest rates = lower inflation, but more unemployment in the short term
2. reduce interest rates = higher inflation, but short term employment growth

3 questions income/wealth inequality raises

1. fairness and justice
2. efficiency
3. political consequences

Gini index as measure of inequality

number 0-1 --> or percentage, where the higher the number is more inequality

electoral consequences of economic policy

leads to economic voting, i.e. voting based on perception of the economy + candidate promises about economic policy

• 4 types

sociotropic economic voting definition

based on perception of the state of the whole economy compared to previous year(s)

egotrophic economic voting

based on perception of individual financial status compared to last year(s)