Role of Government in Directing the Economy

• What economic policies with specific goals do governments set?


  • Controlling inflation
  • Encouraging economic growth
  • Maximising employment
  • Promoting international trade
• What government policies impact business and the economy?

  Fiscal and Monetary Policy
• What is the role of the government in market failures?

  • Having monopoly power
  • Government intervention in a banking crisis
• What is one goal of government economic policies?

  Controlling inflation to stabilize the value of money and purchasing power.
• How do governments control inflation?


  By managing interest rates through monetary policy and taxation through fiscal policy.
• What is the goal of encouraging economic growth in government policies?


  To boost national income and productivity through investments in infrastructure, education, and innovation.
• Why is maximizing employment important for governments?


  High employment levels are key to economic stability.
• What strategies may governments use to maximize employment?


  Job creation programs, subsidies to businesses, and investments in industries.
• What is the purpose of enhancing a country's trade position?


  To ensure better access to global markets
• What is fiscal policy?


  Government decisions on taxation and spending that impact the economy.
• How can increased government spending affect the economy?


  It can stimulate demand in the economy.
• What is a consequence of higher taxes in fiscal policy?


  Higher taxes may be used to slow inflation or reduce public debt
• What is monetary policy?


  The adjustment of interest rates and control of the money supply to manage economic activity.
• How do lower interest rates influence economic activity?


  They encourage borrowing and investments.
• What is the effect of higher interest rates on the economy?


  Higher rates are used to control inflation.
• Who implements monetary policy in the UK?


  The Bank of England.
• Can the king override the Bank of England's monetary policy?


  Yes, the king has the authority to override it.
• What prompts government intervention in market failures?


  Events like banking crises, such as the 2008 crisis.
• What actions might a government take during a banking crisis?


  They may provide bailouts, implement tighter regulations, and establish oversight to prevent financial collapse.
• Why do governments regulate monopolies?


  To prevent abuses of market power that can hurt consumers, such as high prices and low quality.
• What authority in the UK is responsible for regulating monopolies?


  The Competition and Markets Authority (CMA).
• What is the purpose of the Competition and Markets Authority (CMA)?


  To ensure that businesses do not engage in anti-competitive practices.
• To whom are public sector organisations accountable?


  the public and the government.
• Why is accountability important in the public sector?


  Accountability ensures taxpayer money is spent efficiently, and services are effective.
• What is the difference between public administration and public management?


  Public administration focuses on implementing policies, while public management focuses on improving them.
• How are public sector organisations funded?


  Public sector organisations rely on taxation, borrowing, and other revenues.
• What is a key financial responsibility of public sector organisations?


  Managing funds for large services like the NHS and ensuring financial accountability.
• What does public administration involve?


  Implementing policies.
• What is the focus of public management?


  Improving policies and services.