2.1.2 Government policies

Fiscal policy – government revenue and government expenditure:

• definition of fiscal policy
• government revenue – direct and indirect taxes
• government expenditure – main areas of focus
• fiscal deficits and fiscal surpluses
• impact of a fiscal deficit and fiscal surplus
• the impact of fiscal policy on macroeconomic objectives.

Monetary policy – focused on interest rate changes:

• definition of monetary policy
• definition of interest rates
• central banks role in setting interest rates
• impact of changes in interest rates on macroeconomic objectives:
  • the mechanism by which a change in interest rates affects consumers and businesses
  • awareness of asset purchasing used by central banks.

Supply-side policy:

• definition of supply-side policy
• supply-side policy and its impact on productivity and total output
• the impact of supply-side policies on macroeconomic objectives:
  • privatisation
  • deregulation
  • education and training
  • policies to boost regions with high unemployment
  • infrastructure spending
  • lower business taxes to stimulate investment
  • lower income tax rates to encourage working.

Government controls:

• advantages and disadvantages of:
  • regulation
  • legislation
  • fines
  • pollution permits.