Fiscal Policy
This type of fiscal policy involves the government increasing spending or cutting taxes to boost aggregate demand.
What is expansionary fiscal policy?
The central bank tool most commonly used to influence borrowing, spending, and inflation.
What is the interest rate?
Supply-side policies aim to increase this — the maximum output an economy can produce at full employment.
What is long-run aggregate supply?
The most commonly used measure of economic growth, calculated as the percentage change in the total value of goods and services produced in an economy.
What is the GDP growth rate?
The term for the automatic increase in government spending (e.g. on unemployment benefits) that occurs during a recession without new legislation.
What are automatic stabilisers?
The unconventional monetary policy used after 2008 where central banks created money to buy government bonds, injecting liquidity into the economy.
What is quantitative easing?
Reducing business regulations and red tape is an example of this type of supply-side policy.
What is deregulation?
This type of economic growth involves increasing an economy's productive capacity, as opposed to simply using up spare capacity.
What is long-run (or sustainable) economic growth?
When a government spends more than it collects in tax revenue in a given year, this is the result.
What is a budget deficit?
This US institution is responsible for setting monetary policy and has a dual mandate of price stability and maximum employment.
What is the Federal Reserve (the Fed)?
Policies designed to improve the skills of the workforce, such as apprenticeships and vocational training, are examples of this form of supply-side intervention.
What is investment in human capital?
This type of capital, including roads, bridges, and broadband networks, is considered a key driver of long-run economic growth by reducing business costs and improving productivity.
What is infrastructure (or public capital)?
This fiscal concept describes how a $1 increase in government spending can lead to a larger overall increase in national income.
What is the fiscal multiplier?
This situation occurs when interest rates are near zero and conventional monetary policy loses its effectiveness at stimulating the economy.
What is the liquidity trap?
Supply-side economists argue that cutting marginal income tax rates can increase this, as workers keep more of each additional pound earned.
What is the incentive to work (or labour supply)?
This index, developed as an alternative to GDP, measures a country's development across health, education, and standard of living.
What is the Human Development Index (HDI)?