Chapter4

这是一篇关于Chapter4的思维导图，主要内容包括了MONETARY OOLICY、Fiscal policy、Supply side policy。

Chapter4

• Monetary policy
  • definition: the government controls the money supply to achieve certain macroeconomic aims. Usually by changing the interest rate, the money supply and the exchange rate.
    • recession--expansionary monetary policy tries to stimulate the economy by
      • increasing the money supply(C ↑）
      • lowering the interest rates( Inverstment ↑）
      • lowering the exchange rate（export↑）
    • inflation--contractionary monetary policy tries to slow down the economy by
      • decreasing the money supply(C↑）
      • raising inyerest rates(I↓）
        • S
      • raising the exchange rate (export↓）
• Supply-side policy
  • definition: a government action wich leads to increase aggregate supplt in an economy by improving either the quality or the quantity of resources.
    • spending on education and training→raise skills and labour productivity→increase the productive potential of an economy
    • reforming trade unions→reduce the power of trade unions→vetter relationship→make labour more productive or increase the number of people empolyed→incrase the productive capacity of an economy
    • lower direct taxes→increase the incentives激励 for emplyees and entrepreneurs→increase the production
    • deregulation→remobing barriers to produce by less rules and regulations→lower costs→increase the production\
    • Privatisation → transferring public sector activities to private sector firms → increase productivity → increase production
    • Expanding infrastructure → improving the network of transport (land, water, air) and communication → increases mobility and availability of resources →to facilitate the efficient production
    • Subsidies or grants→ encourage entrepreneurs to start up new businesses or to innovate → increase production
    • Reduced social welfare payments → lowering benefits forces more people to (re)join the workforce →increase production
  • Effects of supply side policies on government aim
    • 子主题
      • improving either the quality or the quantity of resources→increase the
      • productive capacity of an economy →greater production →create more
      • jobs →full employment
      • improving either the quality or the quantity of resources→increase the
      • productive capacity of an economy →greater production →high economic
      • growth
      • improving either the quality or the quantity of resources→increase the
      • productive capacity of an economy →greater production →increase the
      • aggregate supply →lower the price level →price stability
      • improving either the quality or the quantity of resources→increase the
      • productive capacity of an economy →greater production→create more jobs
      • → higher incomes →increase imports →BOP instability
• Fiscal policy
  • definition: the government use government spendng and income tax rates to achieve certain macroeconomic aims
    • reession--expansionary fiscal policy: incrase government spending or reduce tax rates to incrase aggregate demand to stimulate the economy
      • and then will have more investment and output, low unemployment
        • effect on macroeconomic aims
    • inflation--contractionary fiscal policy: to reduce government spending or increase income tax rated to reduce aggregate demand to slow down an economy
      • and then will reduce the inflation, also help reduce BOP deficit
        • effect on macroeconomic aims
  • government spending
    • provide essential public services
    • provide merit goods
    • provide public goods
    • maintain and improve the infrastructure of an economy
    • provide welfare services
    • achive macroeconomic aims
  • taxation
    • classification
      • direct taxes
        • personal income tax
        • corporation tax
          • net profit
        • capital gains tax
          • sale of shares
        • inheritance tax
      • indirect tax
        • sale tax
      • progressive tax
      • regressive tax
      • proportional tax
  • reasons why government collect tax
    • raise revenue
    • redistribute income form rich to poor
    • discourage the consumption of demerit goods
    • discourage the consumption of imports
    • influence economic activity