Macroeconomic aims
Define macroeconomic aims’ basic concept.
low inflation, sustainable economic, low unemployment rate, and has a balanced payment.
Define facial policy
The government controlling the taxes and inflation to maintain the economics.
Define central banks’ policy to control inflation
Manages money supply and interest rates to control inflation.
Define inflation and deflation
Inflation: increase in sustained price level
Deflation: decrease in sustained price level
Define a mixed economy.
Why are the keys in macroeconomic important? (List 1 example)
E.g. low inflation maintains everyone’s purchasing power.
E.g. low unemployment reduces poverty
What are goals of contractionary fiscal policy?
decrease spendings and increase taxes
Who is responsible for monetary policy?
The central bank
Explain a potential negative consequences of high and unpredictable inflation for an economy.
E.g creates uncertainty to lower the rate of investments
Explain the challenge governments face in a mixed economy
e.g. market efficiency balancing may be hard to control.
Why is balanced payment important?
Prevents borrowing abroad to pay, and currency devaluation.
Identify tools government use to make fiscal policy.
Changing spendings and taxation
Identify the tools central banks use to manage
Interest rate, open market operation, reserve requirement
Explain why deflation can be damaging to an economy
Lowers consumer’s purchase.
List another challenge faced with market inside mixed economy
E.g. Industrial's growth may cause pollution
Describe impacts of inflation.
e.g. changes in the price of goods changes people’s life, makes it harder to maintain a sustainability.
How may a reduction in tax rate affect demand?
When the tax rate decreases, the household income increases.
How is open market operations used to increase money supply?
Banks increase the money supply by buying bonds.
Explain why inflation can be damaging to the economy
e.g the goods’ price is too high will also decrease consumers demand and purchasing chance.
Why might a government face a dilemma
The inflation is damaging too much will cause a dilemma
Explain a potential conflict when low inflation and high economic growth happen at the same time.
Access to demand pull inflation
What is “automatic stabilizers” ?
E.g. unemployment benefits in economic recession.
What is quantitative easing, and under what circumstances might a central bank use it?
Central bank buys long term assets to lower long term rates.
Describe the "deflationary spiral" and why it is dangerous.
Falling in prices causing the low wages causing further price drops.
How can fiscal and monetary policy affect in mixed economy?
Help completes markets and manage to avoid eg debt crises.