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Unit 3 revision - Coggle Diagram
Unit 3 revision
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Fiscal policy
This is anything to do with government spending and intervention through taxation and supplying goods.
They do this to supply goods in sectors such as health or defence, reduce poverty through benefirs and support the economy.
Types of spending include Social protection (living standards), education, healthcare, defence / law and order and debt interest.
Government revenue is gain and spending is loss, and these determine whether the govt is in a budget deficit (too much spending, or surplus (not enough).
A budget surplus can be done to help the balance of payments (govt debt) and a deficit can be good as we're benefiting the economy through spending.
There are direct taxes such as income and inheritance tax, and indirect such as VAT.
Government objectives are economic growth, lower unemployment, price stability, and fair distribution of income
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Economic Growth
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Can affect unemployment, income, spending and therefore supply
Some determinants are size of workforce, changes in technology, and government intervention.
Monetary policy .
This is using interest rates and other means to influence demand and supply of money in the economy.
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By lowering central bank interest rates, spending and borrowing is incentivised and saving is disincentivised.
Because of lower interest and more spending, firm investment increases, enlarging output . More supply for pounds means cheaper exports
More spending can also cause higher employment, but if interest rates fall, there's less total demand so more unemployment and growth as people with mortgages have less money.
Loans are also affected by changes in interest rates, as loans may fall or rise, and more retained profits.
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