Chapter 6, definitions

Fiscal policy-the taxation and spending decisions of a government.

Monetary policy-central bank and/or government decisions on the rate of interest,the money supply and the exchange rate.

Supply-side policies-policies designed to increase aggregate supply by improving the efficiency of labour and product markets.

Relationary:of policy measures designed to increase aggregate demand.

Deflationary: of policy measures designed to reduce aggregate demand.

Discretionary fiscal policy-deliberate changes in government spending and taxation designed to influence aggregate demand.

Automatic stabilisiers-forms of government spending and taxation that change automatically to offset fluctuations in economic activity.

Economic cycle-the tendency for economic activity to fluctuate outside its trend growth rate,moving from a high level of economic activity (boom) to negative economic growth (recession)

Progressive tax-a tax that takes a higher percentage from the income of the rich.

Regressive tax-a tax that takes a greater percentage from the income of the poor.

Recession-a fall in real GDP over a period of six months or more.

Human capital:education,training and experience that a worker,or group of workers,possesses.

Tariff-a tax on imports.
Quota-a limit on imports.

Occupational immobility of labour-difficulty in moving from one type of job to another.

Protectionism-the protection of domestic industries from foreign competiton.

Voluntary export restraint (VER)-a limit placed on imports from a country with the agreement of that country's government.