Flashcards: Understanding Macroeconomic Policies and Fiscal Space — 20 cards

Macroeconomic policies — definition?

Strategies influencing overall economic activity.

Fiscal policy — role?

Uses government spending and taxes to manage demand.

Monetary policy — mechanism?

Central bank adjusts interest rates and money supply.

Green quantitative easing — purpose?

Supports climate goals via asset purchases.

Carbon taxes — function?

Tax on fossil fuels to reduce emissions.

Fiscal expansion during COVID-19 — scale?

Unprecedented government spending worldwide.

High-income countries — fiscal capacity?

Larger due to favorable credit and low interest rates.

OECD Green Recovery Database — purpose?

Tracks green initiatives in fiscal measures.

Fiscal space — definition?

Government’s room to increase spending without instability.

IMF on fiscal space — view?

Capacity to provide resources sustainably.

Modern Money Theory — core idea?

Sovereign currency issuers can always create money.

Monetary sovereignty — significance?

Enables countries to control their currency and policy space.

Godley's fundamental identity — formula?

(S - I) + (T - G) + (M - X) = 0.

Sectoral balances — components?

Private, government, and foreign balances.

Private sector balance — components?

Households, non-financial, and financial corporates.

Twin deficit approach — assumption?

Private balance remains constant; government and foreign balances linked.

Ricardian equivalence — claim?

Private saving offsets government deficits.

Structuralist approach — causality?

Private balance influences government and foreign balances.

Empirical evidence — sectoral balances?

Valid during euro crisis, showing sector shifts.

Fiscal policy during COVID-19 — disparities?

High-income countries expanded more than low-income ones.