Economic policies
The four goals of Kaldor's magic square, fiscal and monetary policy, deficit, debt and the multiplier, the trade-off between inflation and unemployment: choosing the right measure for a given economic situation.
- 33 cards
- 5 topics
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Each topic is weighted the way the exam weighs it.
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A few cards from the deck
Short-term stabilisation policy: what is it?
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The short-term measures a government takes to smooth out swings in activity: supporting demand in a slowdown, cooling it when the economy overheats.
It differs from structural policy (training, pensions, competition), which acts in the long run on how markets work and on supply.
Which of these goals is not part of Kaldor's magic square?
- Reducing income inequality
- Balanced external trade
- Price stability
- Full employment
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Reducing income inequality
The four goals are growth, full employment, price stability and external balance. Income distribution is an important goal, but it is not one of the four corners of the square.
The magic square of … brings together four goals: growth, full employment, price stability and … balance.
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The magic square of Kaldor brings together four goals: growth, full employment, price stability and external balance.
It is called magic because the four are hard to reach at once: improving one often worsens another.
Fiscal policy: what is it?
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The state's action on activity through its spending (investment, benefits, public wages) and its revenue (taxes, contributions).
It is decided by the government and parliament. A stimulus raises spending or cuts taxes; austerity does the opposite.