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Fiscal and monetray policy - Coggle Diagram
Fiscal and monetray policy
Fiscal policy
fiscal policy is the use of government revenue collection and expenditure to influence a country's economy.
The uk government spend money to look after the needs of society.
the main areas of government spending:
Pensions
Health care
Education
welfare
Interest payments
Defence
What is it
The UK gov gets its revenue from
national insurance
excise duties
council tax
Direct taxes and indirect
direct taxes are taxes imposed on the income of individuals or profit
Indirect taxes are taxes imposed on goods or services
Business rates
coorperation tax
Taxation is the method used by government to raise revenue
A balanced budget
a balanced budget occurs when government revenue is equal to or greater than government expenditure
Budgets are often in deficit when the economy has low economic growth or is in a recession
Taxation can impact employment, inflation and economic growth
fiscal policy can be used to meet government objectives
monetary policy
Monetary policy is the manipulation of the rate of interest, the money supply and exchange rates to influence the level of economic activity
The primary objective of monetary policy is to obtain low inflation
by raising intrest rates the cost of borrowing increases
demand pull inflation will start to fall
increasing supply of money to economy will encourage spending
saving and borrowing
investment