Managing the economy

1. GCSE ECONOMICS: UNIT 12 Managing the economy Fiscal & Monetary Policy

2. Learning Objectives • Understand how the government uses Fiscal Policy to achieve its economic objectives • Analyse how the Bank of England uses Monetary Policy to help control inflation

3. Links with previous lessons… • If you recall from our work on the economic cycle, the government would ideally like real GDP to grow at (or as close to) the trend rate- why is this? A. If this can be achievedthen growth is moresustainable, the level of unemployment remains low, inflationis low and stable andthere is a greater chance of a balance of payments

4. Fiscal Policy introduced… • Achieving a smooth(er) economic cycle is easier said than done! • Fiscal policy is one tool the UK government can use to combat the cyclical nature of real GDP and help smooth the economic cycle (i.e. achieve it’s economic objectives) • Fiscal policy includes both government taxation (both direct and indirect) and government expenditure • Fiscal policy can therefore have a huge impact on people’s incomes and therefore their incentive to spend

5. Fiscal Policy in The Budget • Each year the incumbent government reviews its fiscal policy, setting out the level level of taxation and spendingin The Budget for the year(s) ahead • Open the document called The Budget & Fiscal Policy and summarise the changes to government taxation and spendingin the latest budget

6. Gimme 5 things you know about the Bank of England! • You have 5 minutes to use the internet (if you need it!)

7. Monetary Policy • In small groups produce a mini-slideshow which covers the following; • Who are the BOE? • What are the objectives of the BOE? • What is Monetary Policy? • How can Monetary Policy help to control inflation and economic growth? • How have interest rates changed over the past 10 years (chart)? You have 20 mins!!