Economics: Unemployment, Price Stability, and Balance of Payments
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Questions and Answers

What type of tax is characterized by paying a greater percentage as you earn more?

  • Progressive tax (correct)
  • Indirect tax
  • Regressive tax
  • Proportional tax

    • What is the primary goal of expansionary fiscal policy during a recession?

  • Create jobs and stimulate economic growth (correct)
  • Increase taxation
  • Reduce government borrowing
  • Reduce government spending

    • What is the term for the actual value of GDP at current prices?

  • Money GDP (correct)
  • Real GDP
  • Nominal GDP
  • GDP per capita

    • What is the aim of government macroeconomic policies to achieve low stable inflation?

    <p>To maintain low and stable inflation</p> Signup and view all the answers

    What type of tax is characterized by a flat tax rate on all incomes?

    <p>Proportional tax</p> Signup and view all the answers

    What is the term for the increase in GDP per capita?

    <p>Economic growth</p> Signup and view all the answers

    What is the purpose of fiscal policies related to government expenditure?

    <p>To influence economic activity and reduce market failure</p> Signup and view all the answers

    What happens when the government's expenditure is greater than its tax revenue?

    <p>Budget deficit</p> Signup and view all the answers

    What is the purpose of progressive tax system?

    <p>To promote more equal distribution of income</p> Signup and view all the answers

    What is the main goal of price stability?

    <p>To keep prices as stable as possible or as low as possible</p> Signup and view all the answers

    What is the purpose of import tax or import duty?

    <p>To discourage the buying of imports</p> Signup and view all the answers

    What is the formula to calculate the unemployment rate?

    <p>Number of unemployed divided by labour force, multiplied by 100/1</p> Signup and view all the answers

    What is the purpose of a budget in fiscal policies?

    <p>To show the government's revenue and expenditure</p> Signup and view all the answers

    What is the purpose of a budget surplus?

    <p>To redistribute income from rich to poor</p> Signup and view all the answers

    Study Notes

    Unemployment

    • Unemployment rate is the percentage of the labour force who are willing and able to work but cannot find a job.
    • Unemployment rate formula: (Number of unemployed ÷ Labour force) × 100/1

    Price Stability

    • The goal of price stability is to keep prices as stable as possible or as low as possible.
    • If prices keep rising (inflation), the value of people's incomes falls.

    Balance of Payment Stability

    • NZ trades with other countries through exports and imports.
    • The goal is to have exports greater than imports, earning NZ money.

    Redistribution of Income

    • The aim is to have a more equal distribution of income.
    • No gap between rich and poor through a progressive tax system and social welfare system.

    Fiscal Policies

    • Fiscal policies deal with taxation, government spending, and government borrowings.
    • The government raises revenue through taxes.
    • If the government does not have enough tax revenue, it will borrow to fund expenditure.
    • The government spends tax revenue on public goods.

    Types of Fiscal Policies

    • Budget deficit: Expenditure is greater than tax revenue.
    • Budget surplus: Tax revenue is greater than expenditure.
    • Budget: A document showing government tax revenue and expenditure.

    Reasons for Government Expenditure

    • To influence economic activity.
    • To reduce market failure by spending on public goods.
    • To promote more equal distribution of income through social welfare.
    • To pay off loans and interest.

    Budget Surplus

    • To redistribute income from rich to poor.
    • To discourage consumption of demerit goods.
    • To raise the cost of production of firms that cause pollution.
    • To discourage the buying of imports.

    Direct and Indirect Tax

    • Direct tax: Responsibility of tax falls on a specific person (e.g., income tax, company tax).
    • Indirect tax: Tax imposed on goods and services, paid by consumers.

    Types of Taxes

    • Progressive tax: Pay a greater percentage as you earn more (e.g., PAYE).
    • Regressive tax: When income rises, the proportion of total tax paid falls (e.g., GST).
    • Proportional tax: A flat tax, with a fixed percentage on all incomes.

    Recession

    • If the economy is in a recession, the government will borrow and spend on public goods to create jobs.
    • If the economy is in a boom phase, the government will cut expenditure and borrowing.
    • Expansionary fiscal policy: When the government borrows and spends more in a recession.
    • Contractionary fiscal policy: When the government spends and borrows less in a boom cycle.

    Economic Growth

    • Aims of government macroeconomic policies:
      • Low unemployment.
      • Low stable inflation.
      • Balance of payment equilibrium.
      • Steady economic growth.
      • Avoidance of exchange rate fluctuations.
      • Sustainable economic growth.

    Measuring Economic Growth

    • Economic growth is measured by the increase in GDP per capita.
    • Money GDP: The actual value of GDP at current prices.
    • If economic growth takes place, GDP per capita will rise.

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    Description

    Learn about key economics concepts including unemployment rate, price stability, and balance of payments. Understand the formulas and importance of these economic indicators.

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