economics - macroeconomics

define fiscal policy

the use of government spending and taxation to influence the economy. It aims to manage economic growth, inflation, and employment levels.

expansionary fiscal policy

reduces taxes and increases government spending to boost demand so employment and output rises. May be used to reduce recession.

define fiscal policy

the use of government spending and taxation to influence the economy. It aims to manage economic growth, inflation, and employment levels.

expansionary fiscal policy

reduces taxes and increases government spending to boost demand so employment and output rises. May be used to reduce recession.

contractionary fiscal policy

increases taxes and increasing government spending to reduce demand, so employment and output rises. Used to reduce price inflation.

define monetary policy

use of interest rates, direct control of the money supply and the exchange rate to influence aggregate demand

contractionary monetary policy

used to reduce price inflation by increasing interest rates charged by the central bank. Means commercial banks will also raise interest to encourage more spending

Expansionary monetary policy

may be used during a recession to increase employment by cutting interest rates

define supply side policy

Aims to increase economic growth by raising productive potential of economy

tax incentives effect on macroeconomic aims

reducing taxes on profits and small firms can encourage enterprise. Can encourage investments in new equipment

Subsidies/ Grants

to reduce production costs and help firms fund research and development of new technologies

education and training

teaching new/existing workers new skills to make them more productive

labour market regulations

include minimum wage laws to encourage more people into work and legislation to restrict the power of trade unions

competition policy

regulations that outlaw unfair trading practices by monopolies and other large, powerful firms

free trade agreements

removing barriers to international trade allow countries to trade their goods and services freely and cheaply.

deregulation

removing old, unnecessary and costly rules and regulations on business activities.

name 5 types of taxation

progressive tax, regressive tax, proportional tax, direct tax, indirect tax