The use of government expenditure, taxation, and government borrowing to affect the levels of income and expenditure within the economy.
Government budget
Government's plan for spending and tax.
Budget surplus
Where government revenue is greater than government expenditure.
Budget deficit
Where government expenditure exceeds government revenue.
Monetary policy
The manipulation of the base interest rates and other monetary tools to influence general levels of demand in the economy. It's primary use is to control inflation to keep price stability and to encourage economic growth.
Base rate
The interest rate set by the Bank of England that influences market interest rates.
Supply-side policies
Government policy to enable an increase in the quantity or quality of goods and services produced in an economy.
Direct taxes
Tax taken from income.
Trade unions
An organised association of workers formed to protect and further their rights and welfare.
Privatisation
The process of transferring public sector organisations to the private sector.
Deregulation
The removal of regulations or restrictions on a particular business or industry.
Externalities
Costs (or benefits) arising from the decisions of an individual which impact on people other than that individual.
Positive externalities
Positive effect received by a third party resulting from a transaction in which they had no direct participation.
Negative externalities
Occurs when a product or decision has a bigger cost to society in relation to its private cost.