Application for essays - Macroeconomics

Question 1

Application for increase in money supply causing inflation (monetarist view)

Answer 1

Economist Kalecki:
‘If more money is in the economy, firms may decide to mark up their prices for their limited goods’

Question 2

Criticism of GDP

Answer 2

‘ The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP ‘
Simon Kuznets, the inventor of GDP methodology

Question 3

What is the Bank of England’s annual inflation target?

Answer 3

2%

Question 4

What is the current base rate of interest?

Answer 4

4.5% (May 2023)

Question 5

What is the current inflation rate?

Answer 5

10.1% (March 2023)

Question 6

What is an example of contractionary fiscal policy?

Answer 6

Bill Clinton increased taxes on high-income earners and reduced spending on defense

Question 7

What is an example of contractionary monetary policy?

Answer 7

Thatcher raised interest rates to 17% in the early 80’s to control inflation (inflation was round 22% in 1980)

Question 8

What is an example of expansionary monetary policy?

Answer 8

Quantitative easing
By buying up bonds, increase in price and so lower yield.
Less incentive to save in bonds so MPC increases (stimulates growth)

Question 9

What is an example of expansionary fiscal policy?

Answer 9

Obama administration boosted government expenditure by $831 billion in the wake of the 2008 financial crisis

Question 10

Why might changes in GDP resulting from increased/decreased exports be insignificant?

Answer 10

Net exports represent a small percentage of GDP even for countries such as China (<10% every year)

Question 11

Why might a trade deficit be okay?

Answer 11

Post Keynesian Mosler states ‘The real wealth of a nation is all it produces and keeps for itself, plus all it imports, minus what it must export’

Question 12

Where did the UK rank in HDI score in 2022?

Answer 12

18th

Question 13

Evaluation for MLC

Answer 13

CAB may worsen originally due to time being a determinant of PED and so inelastic demand

Question 14

Definition/quote for sustainability

Answer 14

‘Sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs’ Brundtland Commission

Question 15

Quote linking economic growth and development

Answer 15

‘’Economic growth is often a necessary but not always sufficient condition for development’ - Amartya Sen

Question 16

Application for inequality

Answer 16

1 in 9 people worldwide do not have enough food to eat

Question 17

Who developed the theory of comparative advantage?

Answer 17

David Ricardo

Question 18

What was China’s population in 2021?

Answer 18

1.4 billion

Question 19

Trump’s tariff on China

Answer 19

In 2018, Trump imposed a 25% tariff on Chinese steel

Question 20

Which components of AD are the greatest impacting figures and which are the smallest?

Answer 20

Consumption is the biggest determinant of AD
Net Exports are the smallest determinant of AD

Question 21

How was expansionary fiscal policy used in the pandemic?

Answer 21

• VAT cuts in affected industries such as hospitality, from 20% to 5%
• Wage subsidies in the form of the furlough scheme

Question 22

What was the budget deficit in 2020-21 (pandemic year) as a percentage of GDP?

Answer 22

14.5% of GDP

Question 23

What is the national debt in the UK right now?

Answer 23

Around 100% of GDP

Question 24

How much is the government set to pay on debt interest this year?

Answer 24

£116 billion
More than is spent on schools in the UK

Question 25

How is contractionary fiscal policy being enacted right now?

Answer 25

Corporation tax increased from 19% to 25%

Question 26

What is the consequence of the freezing of tax bands in the UK?

Answer 26

As wages increase, workers will be put into higher tax brackets and so the government will receive more tax revenue, this is known as fiscal drag.
Consequently, income inequality may worsen.

Question 27

Neoclassical view on fiscal policy

Answer 27

‘There is no such thing as public money; there is only taxpayer’s money’ - Margaret Thatcher

Question 28

What was the annual growth in the UK last year?

Answer 28

4.1%

Question 29

What is the forecasted growth rate for the UK this year?

Answer 29

-0.2%

Question 30

The UK’s current account deficit

Answer 30

UK has ran a current account deficit since the 80’s of between -2% and -5% and so could be argued to be a less important objective as quality of life factors have increased

Question 31

Increase in gas prices

Answer 31

Gas prices rose by 129% from March 2022 - March 2023

Question 32

HKD -> USD

Answer 32

7.85 -> 1