Reasons of Microeconomic intervention
what type of good is water?
what is public good?
One charateristics of a Indirect taxe
eg. 1. Paid by consumer when they make a purchase
1. higher on demerit goods,
1. it is used to raise govt revenue
What is income
Income is the flow of earnings received over a period of time from the factors of production
USA increased the interest rate of their central bank by 2 percent. What type of policy is it, is it Expansionary use or Contractionary use?
Monetary policy Contractionary
in a race you overtook the second place runner, what place are you in now?
What is Second?
Example of merit good and a demerit good
what are Subsidies
A subsidy is a payment made by the government to producers to reduce the cost of production
whats wealth
Wealth is the stock of assets owned at a point in time
E.g. Property, shares, antiques, pension schemes
Assets can be used to generate a flow of income
What are the 3 main macroeconomic objectives?
Economic growth
Low unemployment
Price stability
it is the only continent on Earth with no active volcanoes.
Australia
2 Definitions of a public good
What is non excludable and non rivalrous?
What are price cellings and floors mean
A price ceiling is a maximum price set by the government. Sellers cannot legally sell the good or service at a higher price
A price floor is set by the government above the existing free market equilibrium price and sellers cannot legally sell the good/service at a lower price
Why does govt set up minimum wage
They do this in order to improve equity and avoid the exploitation of workers
What does balanced budget mean
government revenue = government expenditure
Why governments control prices
what is
Governments use price controls to correct market failure and improve the allocation of resources
Buffer stocks occur when the government buys excess supply when prices are low and sells stocks when prices are high to stabilise prices
What is Progressive taxation
Progressive tax system: as income rises, a larger percentage of income is paid in tax (e.g. UK Income Tax; UK Corporation Tax)
Difference between Capital spending and Current spending
Capital spending is expenditure on long-lived assets that increase the productive capacity of the economy, while Current spending is day-to-day expenditure on the ongoing provision of public services
individuals are aware that they can consume a good without paying for it, Therefore choose not to pay, even if they value the good.
One example of Provision of information.
Governments provide information on the risks of smoking, alcohol misuse and poor diets through public health campaigns and warning labels.
Appliances and vehicles are labelled with energy efficiency ratings to help consumers compare long-term costs and environmental impact.
Information on exam results, training options and employment prospects helps students and workers make better education and career choices
Which policy is most likely to reduce wealth inequality rather than income inequality?
A. Increasing the national minimum wage
B. Increasing transfer payments to unemployed workers
C. Increasing inheritance tax
D. Increasing government spending on educatio
C. is the correct answer
Explanation
A. Minimum wage
Raises earnings for low-paid workers → reduces income inequality, not wealth
B. Transfer payments
Redistribute income from taxpayers to recipients → reduces income inequality
C. Inheritance tax
Taxes the transfer of assets → reduces the accumulation of wealth across generations → reduces wealth inequality
D. Government spending on education
Improves skills and earning potential → reduces income inequality over time (equality of opportunity)
Are Deregulation and competition policy considered Supply side policy?
yes. (Reducing unnecessary regulation lowers costs for firms and encourages new entrants to markets, Greater competition incentivises firms to innovate, cut costs and improve efficiency - raising economy-wide productivity Examples include deregulating labour markets to improve flexibility, and removing barriers to entry in key industries)