Fiscal Policy 1.) How the government collects revenue and its patterns of expenditure. 2.) Candidates should be aware of how the government can affect levels of income and expenditure through fiscal policies.

Fiscal policy answers Direct Tax on income – Income, Corporation Indirect Tax on expenditure – VAT, excise duty Government spending on merit goods & services, benefits, aid, interest repayments. Increase income via a reduction in direct tax which impacts expenditure for consumers/firms. Increase expenditure by reducing indirect tax. However reducing the above tax will reduce tax receipts which can influence Government income and therefore expenditure.

Monetary Policy 1.) The role of the Bank of England in controlling the level of demand. 2.) Candidates should be aware of the use of interest rates to control inflation.

Monetary Policy Answers Bank of England meet monthly to discuss the current economic climate. They will adjust the BASE RATE which will have an affect on the rates we see offered in retail banks i.e. APR & AER Interest rates control DEMAND PULL INFLATION through changing the COST OF BORROWING & the REWARD FOR SAVING. Which affects the level of expenditure in the economy.

Supply Side Policy Identify policies for the following areas: > education and training > incentives to work  competition policy What is the aim of supply side policy?

Supply Side Policy - Answers Education – free, leaving age, curriculum, linear exams. All aimed at raising standards. Training - Back to work, apprenticeships Incentive to work – JSA, Family tax credits, Low tax bracket (free allowance) Competition – OFT, Competition Commission Aim is to increase the PRODUCTIVE POTENTINAL of the UK to achieve growth without the high opportunity cost of inflation.