Thursday, October 2, 2014

List of the Most Important Definitions for Chapter 7: Macroeconomic Policies (CIE-AS)

Last list of definitions for AS:

1. Administrative barriers: It is where the paperwork is unnecessarily made more difficult than it would otherwise be with the aim to discourage imports (expenditure switching)

2. Contractionary/ deflationary fiscal policy: A reduction of public sector spending or/ and increase in taxation with the aim of reducing the AD and hence level of income (expenditure dampening)

3. Contractionary/ deflationary monetary policy: An increase in the rate of interest with the aim of reducing the aggregate demand and hence level of income (expenditure dampening)

4. Expenditure switching: A policy which attempts to bring about a change in the pattern of demand in an economy by reducing the purchase of imports and increasing the demand for exports

5.Expenditure dampening: A policy which attempts to bring about a reduction in the level of aggregate demand

6. Exchange rate controls: These are restrictions on the buying and selling of foreign currency and is put in place to make it more difficult to finance the purchase of imported products (expenditure switching)

 7. Embargoes: Ban on imports from particular countries which can be applied to some products or all usually for political and military rather than economic reasons

8. Interest rate policy: The use of changes in interest rate to bring about particular objectives such as influencing the exchange rate

9. Quota: A limit on the imported products that are allowed to enter a country (expenditure switching)

10. Subsidies: A grant given by the government to producers with the intention of keeping costs low so that local firms can gain artificial competitive edge, thus allowing the demand for imports to fall while exports to increase (expenditure switching)

11. Tariffs: A charge levied by the government onto imported products with the intention of making them artificially more expensive so that the people will reduce the demand for the product (expenditure switching)

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