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direct tax + example
a tax on income or wealth, a progressive tax e.g. income tax
indirect tax + example
a tax on spending on goods and services. a regressive tax. e.g. VAT
target of BOE
achieve target of 2% of inflation
policy responses to 2008 financial crisis
base rate lowered to 0.5%
quantitative easing implemented to boost money supply
cut in vat
government spending increased in order to stimulate the economy
bailing out of banks
strengths of demand-side policies
can relatively quickly affect ad, stimulating/contracting the economy helping to achieve macroeconomic objectives
weaknesses of demand-side policies
classical economists argue that demand side policies will have no affect on long run output
expansionary policies will cause inflation
contractionary policies will cause unemployment
always will be some time lags e.g. interest rates take 18-24 months to affect mortgage repayments