Flashcards on Key Concepts in Business and Economics
Key Concepts in Business and Economics: Your Study Guide
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Macroeconomics
21 cards
Card 1
Question: What are the two main policy tools used to manage the economy and who controls each?
Answer: Fiscal policy (controlled by the government/Ministry of Finance) and monetary policy (controlled by the central bank).
Card 2
Question: What instruments does fiscal policy use?
Answer: Tax rates and government spending.
Card 3
Question: What are the primary instruments of monetary policy?
Answer: Interest rates, reserve requirements for commercial banks, open market operations (buying/selling bonds), and loans to commercial banks.
Card 4
Question: What are the main goals of fiscal policy?
Answer: To stimulate the economy, manage aggregate demand, and redistribute income.
Card 5
Question: What are the primary goals of monetary policy?
Answer: To control inflation, stabilise the currency, and support economic growth.
Card 6
Question: Define expansionary policy and give fiscal and monetary examples.
Answer: Expansionary policy aims to stimulate the economy. Fiscal example: lowering taxes or increasing government spending. Monetary example: lowering intere
Card 7
Question: Define contractionary policy and give fiscal and monetary examples.
Answer: Contractionary policy aims to slow an overheating economy and reduce inflation. Fiscal example: raising taxes or cutting government spending. Monetary
Card 8
Question: When is expansionary policy typically used?
Answer: During a recession.
Card 9
Question: When is contractionary policy typically used?
Answer: When the economy is overheating and inflation needs to be reduced.
Card 10
Question: How do reserve requirements affect the money supply?
Answer: Lowering reserve requirements allows banks to lend more, increasing the money supply; raising requirements reduces lending and the money supply.