2.6 Macroeconomic objectives and policies key definitions

what is the definition of economic growth?

• economic growth is an increase in national output as measured by real GDP.

what is the definition of a fiscal policy?

• fiscal policy is the use of government spending and taxation to influence AD

what is the definition of a monetary policy?

• monetary policy is adjusting interest rates and the money supply to influence AD.

what is the definition of interest rates?

• interest rates is the cost of borrowing and the reward for saving.

what is the definition of quantitative easing?

• quantitative easing is a process whereby the central bank buys back UK government securities (gilts) from the open market.

what is the definition of direct taxes?

• direct taxes are taxes imposed on an individual and/or organisation’s income or profits.

  • they are paid directly to the government by the individual or firm.

what is the definition of indirect taxes?

• indirect taxes are imposed on the spending on goods and services

what is the definition of an expansionary policy?

• an expansionary policy is a demand-side policy that aims to increase aggregate demand.

what is the definition of a contractionary policy?

• a contractionary policy is a demand-side policy that aims to decrease aggregate demand.