Economic Policy of the State

These flashcards cover key concepts from Chapter 5 on Economic Policy of the State, providing definitions and explanations relevant to the topics discussed.

What are the major responsibilities of most states concerning economic policy?

To encourage growth in the economy, keep inflation low, keep unemployment low, and reduce economic inequality.

What is economic policy?

A course of action intended to influence or control the behavior of the economy, including measures like monetary policy, fiscal policy, and trade policy.

What are the three key aspects of an economy?

Production and consumption, resource allocation, and market dynamics (interaction between supply and demand).

Why is a country's economy important?

It impacts the quality of life of its citizens by determining access to necessities like food, healthcare, education, and housing.

What does 'rent-seeking' mean in economic terms?

The concept where an individual or entity seeks to increase their own wealth without creating benefits to society.

What is the difference between progressive and regressive taxes?

Progressive tax takes a larger percentage from higher-income groups, while regressive tax takes the same amount from all income levels.

What role do central banks play in the economy?

They manage transactions, coordinate policies of private banks, and control interest rates.

What factors diminish a state's capacity to manage its economy?

Globalization, currency management & fluctuations, international investment, trade, and energy inter-dependence.

What is the significance of GDP per capita?

It measures the average economic output per person, reflecting the economic performance of a country.

What is import-substitution industrialization?

An economic and industrialization policy pursued by many Third World countries aimed at economic development.