Demand side policies: Fiscal Policy (Pack 10)

• What is the difference between automatic stabilizers and discretionary fiscal policy?

  Automatic stabilizers adjust without government intervention
• What are the benefits of high levels of public spending?

  Improved public services, economic stability, social welfare
• What does "resource crowding out" mean?

  Private sector investment is reduced by public spending
• What is "financial crowding out"?

  Government borrowing raises interest rates, reducing private investment
• What is meant by "national debt"?

  The total amount of money a government owes
• Why might a large national debt be a concern?

  It can lead to higher interest rates and reduced investment
• What are the consequences of a large national debt?

  Potential for reduced economic growth and higher taxes
• What are the strengths and weaknesses of fiscal policy?

  Strengths:

  • Can stimulate economic growth
  • Helps manage inflation
  • Provides public goods and services

  
  

  Weaknesses:

  • Time lags in implementation
  • Potential for political influence
  • Risk of crowding out private investment
• What are the key events of The Great Depression?

  Economic collapse, high unemployment, bank failures
• What are the benefits of using fiscal policy?

  • Stabilizes the economy
  • Provides public goods
  • Reduces inequality
• What are the drawbacks of fiscal policy?

  • Time lags in policy implementation
  • Risk of political manipulation
  • Potential crowding out of private investment
• How might fiscal policy impact economic growth?

  By influencing aggregate demand and investment levels
• What are the potential effects of expansionary fiscal policy?

  Increased public spending and lower unemployment
• What is the impact of deflationary fiscal policy?

  It can lead to reduced public spending
• What factors might influence the size of a fiscal deficit?

  Economic conditions, government policies, and public demand
• What are the key components of fiscal policy?

  • Government spending
  • Taxation
  • Borrowing
• What is the relationship between fiscal policy and economic stability?

  Fiscal policy aims to promote economic stability
• How does fiscal policy affect inflation?

  It can either increase or decrease inflation rates
• What is the significance of the Laffer Curve?

  It illustrates the relationship between tax rates and revenue
• What are the potential consequences of high public debt?

  Higher taxes and reduced public services
• What are the implications of fiscal policy on social welfare?

  • Can improve social services
  • May reduce inequality
  • Influences overall economic health
• What is the significance of the Great Depression in fiscal policy history?

  It led to major changes in fiscal policy approaches
• What are the key events of the Great Depression in the UK?

  High unemployment, bank failures, economic collapse
• How did the Great Depression influence fiscal policy in the UK?

  It prompted increased government intervention in the economy
• What are the benefits of fiscal policy?

  • Stabilizes the economy
  • Provides public goods
  • Reduces inequality
• What are the drawbacks of fiscal policy?

  • Time lags in policy implementation
  • Risk of political manipulation
  • Potential crowding out of private investment
• How might fiscal policy impact economic growth?

  By influencing aggregate demand and investment levels
• What is the impact of deflationary fiscal policy?

  It can lead to reduced public spending
• What are the potential effects of expansionary fiscal policy?

  Increased public spending and lower unemployment
• What factors might influence the size of a fiscal deficit?

  Economic conditions, government policies, and public demand
• What are the key components of fiscal policy?

  • Government spending
  • Taxation
  • Borrowing
• What is the relationship between fiscal policy and economic stability?

  Fiscal policy aims to promote economic stability
• How does fiscal policy affect inflation?

  It can either increase or decrease inflation rates
• What is the significance of the Laffer Curve?

  It illustrates the relationship between tax rates and revenue
• What are the potential consequences of high public debt?

  Higher taxes and reduced public services
• What is the role of government in managing public expenditure?

  To allocate resources effectively and efficiently
• How can fiscal policy be used to address economic downturns?

  By increasing government spending and cutting taxes
• What are the implications of fiscal policy on social welfare?

  • Can improve social services
  • May reduce inequality
  • Influences overall economic health
• What is the significance of the Great Depression in fiscal policy history?

  It led to major changes in fiscal policy approaches
• What are the key events of the Great Depression in the UK?

  High unemployment, bank failures, economic collapse