Fiscal Policy

  • The use of government spending, taxation and borrowing to achieve relevant economic objectives

Main taxes

  • Income tax
  • Corporation tax
  • VAT

Main tax expenditures

  • Health
  • Education
  • Social Security

What happens if government spending is greater than taxes?

  • Budget deficit

Monetary Policy

  • The use of interest rates and changes to the money supply to achieve relevant economic objectives

Who manages monetary policy?

  • The Bank of England (Monetary Policy Committee)
  • Their main aim is to try and keep inflation around 2%
  • Look to support stability and economic growth

Open Trade and Protectionism

  • The opposite of free/open trade
  • The main aim is to protect domestic businesses and industries from any overseas competition and prevent the outcome resulting solely from open trade


  • A tariff or tax/duty that raises the price of imported products
  • An attempt to reduce the domestic demand for the specific imported products
  • Intended to allow domestic suppliers to scale up


  • Limits on the quantity of imports allowed or a limit to the value of imports permitted into a country over a specific time frame

Non-tariff barriers

  • Other regulations such as labelling requirements or quality standards
  • They are administrative, technical and regulatory obstacles to trade

Export subsidies

  • Payments to encourage domestic production by lowering their costs

Domestic subsidies

  • Domestic subsidies involve government help or state aid for domestic businesses facing financial problems