Fiscal Policy
This type of fiscal policy involves increasing government spending or decreasing taxes to stimulate economic growth.
What is expansionary fiscal policy?
This is one of the four main components of aggregate expenditure, representing consumer spending on goods and services.
What is consumption?
Labor productivity measures the amount of this produced by a worker or group of workers over a specific time period
What is output?
Free trade allows countries to specialize in the production of goods where they have this, meaning they can produce at a lower opportunity cost.
What is comparative advantage?
This type of monetary policy is used to stimulate the economy by lowering interest rates and increasing the money supply.
What is expansionary monetary policy?
A government budget that has higher revenue than expenditure is called this.
What is a budget surplus?
When aggregate expenditure exceeds the economy’s total output, it leads to a reduction in these unwanted stockpiles of goods.
What are inventories?
Improvements in this, including new technologies and processes, are one of the most significant drivers of increased labor productivity.
What is technology?
his type of agreement between countries reduces or eliminates tariffs, quotas, and other trade barriers to promote free trade.
What is a FTA?
The central bank sets this rate, which is the interest rate at which commercial banks can borrow funds from it.
What is the cash rate?
This is the type of tax that takes a larger percentage of income from higher-income earners than from low-income earners.
What is Progressive tax?
When aggregate expenditure equals this measure, the economy is said to be in equilibrium with no pressure for prices to rise or fall.
What happens when AE meets GDP/ What is GDP?
Labor productivity can be calculated using this formula, which divides total output by the number of these.
What is hours worked?
Protectionist policies can include these restrictions, which set a physical limit on the quantity of a good that can be imported.
What are quotas?
In Australia, the Reserve Bank aims for an inflation rate of this percentage range, promoting price stability in the economy.
What is 2-3%?
These fiscal mechanisms, such as unemployment benefits, automatically help stabilize the economy without the need for new government action.
The marginal propensity to consume (MPC) measures the proportion of this that households spend on consumption rather than saving.
How to measure a rise in disposable income?
Enhancements in this, which includes education, training, and experience, can significantly improve labor productivity by making workers more skilled and efficient.
What is human capital?
This argument for protectionism suggests that new industries need protection from international competition until they become more competitive.
What is the infant industry arguement?
This refers to the process through which changes in monetary policy affect the economy, particularly influencing spending and investment decisions.
What is the transmission mechanism?
Governments can use these two tools to implement fiscal policy, one involves adjusting levels of spending and the other involves changes in this.
What are government spending and taxation?
The size of the multiplier is determined by this formula, where 1 is divided by the difference between 1 and the marginal propensity to consume (MPC).
What is 1/(1 - MPC)?
An increase in the amount of this physical input, such as machinery or equipment, can boost labor productivity by allowing workers to produce more output in less time.
What is capital investment?
One major cost of protectionism is this, which occurs when resources are not allocated efficiently due to trade barriers distorting the market.
What is DWL or market inefficiency?
This situation occurs when interest rates are near zero and monetary policy becomes ineffective at stimulating economic growth.
What is the liquidity trap?