2.6

Question 1

macroeconomic objective 1

Answer 1

strong and stable growth

Question 2

macroeconomic objective 2

Answer 2

low unemployment

Question 3

macroeconomic objective 3

Answer 3

low and stable inflation

Question 4

macroeconomic objective 4

Answer 4

balanced trade account

Question 5

macroeconomic objective 5

Answer 5

balanced government budget

Question 6

macroeconomic objective 6

Answer 6

environmental protection

Question 7

macroeconomic objective 7

Answer 7

greater income equality

Question 8

interest rate

Answer 8

cost of borrowing, reward for saving
near 0 to respond to 08 but increased now (base)

Question 9

monetary policies

Answer 9

bank base rate (interest)
quantitative easing (create new money)
forward guidance (consumer confidence by being open)

Question 10

IR ↓ on economy

Answer 10

signal to retail bank
better to borrow
C/I ↑ causes AD shift, u/e ↓
BUT PL ↑ & -ve output gap

Question 11

IR ↑ on economy

Answer 11

signal to retail bank
worse to borrow
C/I ↓ causes AD shift u/e ↑
and PL ↓
households less disposable (?)
sacrifice GDP for price stability

Question 12

IR ↓ on income equality

Answer 12

equality improves as
mortgages are less, more spending money
boost employment
typically higher earners save more so returns fall

Question 13

IR ↓ on income equality EVAL

Answer 13

time length, diff for everyone e.g. high earners dont always save more, asset prices

Question 14

issues (5) with economic growth as measure of living standards

Answer 14

not distributed equally
environment
happiness/ QoL
population
price level?

Question 15

fiscal policy

Answer 15

government spending and taxation to stabilise economy

Question 16

austerity

Answer 16

reduce gov. budget deficit by cutting spending or increasing tax

Question 17

expansionary fiscal policy

Answer 17

↑I crowding in
↑G on transfer (C↑) / state sector
↓Taxation, disposable Y↑ (C↑) or more profit (↑I)
AD shifts out

Question 18

contractionary fiscal policy

Answer 18

I↓ crowding out, capital flight
G↓ on public wage & benefit (C↓)
↑Tax
demand pull deflation
AD shifts in

Question 19

G>T

Answer 19

deficit so more bonds, public debt increases and total interest on bonds

Question 20

G<T

Answer 20

surplus so no need for more bonds, bonds mature so debt decrease and future borrowing is cheaper and credible
but side effects depends on how achieved

Question 21

crowding in

Answer 21

gov. spending increases private investment, e.g. infrastructure, health so increase in productivity
so I↑ as more attractive

Question 22

crowding out

Answer 22

gov. spending fails to increase AD as fall in private investment/ spending (cant compete with gov, higher taxes asw)

Question 23

laffer curve

Answer 23

tax cut can increase revenue as
more incentive to work/ invest, less to avoid and evade taxes and move (& vice versa, ppf)

Question 24

contractionary fiscal eval

Answer 24

lower gov. spending so negative multiplier spiral, in attempt to reduce deficit, growth reduces and less tax revenue which offsets spending cuts

Question 25

main uk supply-side weaknesses (8)

Answer 25

low R&D spending low investment skills shortages economic activity (NEETS) low labour motility ageing infrastructure regional economic imbalances productivity gap

Question 26

supply-side policies

Answer 26

economic measures to improve long-run productive capacity and efficiency (long-term growth and crowding in)

Question 27

quantitative easing

Answer 27

gov creates money and buys bonds (gov and corporate) more confidence as assets up and banks willing to lend

Question 28

quantitative easing eval

Answer 28

increases inequality opportunity cost bubbles currency depreciation not good longterm

Question 29

forward guidance

Answer 29

communicating so more stability and confidence

Question 30

automatic stabilisers

Answer 30

help counteract change, pay for themselves over time e.e. unemployment benefits & progressive tax brackets

Question 31

free-market supply side policies

Answer 31

tax cuts deregulation privatisation (more competition and efficiency) flexible labour markets intellectual property protection free trade and capital mobility

Question 32

market based supply side eval

Answer 32

income inequality less social safety nets less public goods market failure

Question 33

interventionist supply side policies

Answer 33

better social welfare (housing, provision of public and merit good, higher min wage, less poverty) nationalisation R&D funding

Question 34

interventionist supply side eval

Answer 34

crowding out & capital flight inefficient bureaucracy less incentive to work

Question 35

quantitative easing on inequality

Answer 35

increases as asset prices rise which are typically wealthy only harder to buy houses,