examples

Question 1

What happens to supply when firms face higher costs due to a global oil price shock?

Answer 1

Supply shifts left, leading to price increases

This is an example of a microeconomic effect resulting from increased production costs.

Question 2

How does cost-push inflation affect the Consumer Price Index (CPI)?

Answer 2

Cost-push inflation increases CPI; AD may fall due to reduced real incomes

This illustrates the macroeconomic implications of increased production costs.

Question 3

What is the effect of UK government subsidies on renewable energy firms?

Answer 3

Firm costs fall, leading to more investment and output, and greener tech usage

This example highlights the government’s role in promoting sustainable technologies.

Question 4

How do subsidies in the renewable energy sector affect employment?

Answer 4

Boosts green sector employment and investment, leading to long-run AS rise

This reflects the macroeconomic benefits of government intervention.

Question 5

What happens to potato prices during a drought that impacts UK potato crops?

Answer 5

Prices spike due to increased inelasticity of supply; producers benefit short term

This demonstrates the microeconomic impact of supply shocks on prices.

Question 6

How does food inflation affect consumer real incomes?

Answer 6

Increases CPI and squeezes consumer real incomes

This is a macroeconomic consequence of supply issues in agriculture.

Question 7

What characterizes the UK grocery market in terms of competition?

Answer 7

Highly competitive, e.g., Aldi vs Tesco

This competition leads to lower prices and efficient firms.

Question 8

What is a consequence of a highly competitive market for consumers?

Answer 8

Lower prices and high consumer surplus

This results in boosts to real incomes and aggregate demand (AD).

Question 9

What is the purpose of price caps imposed by Ofgem on UK energy suppliers?

Answer 9

Limits profits while protecting consumers from exploitation

This regulation aims to maintain fair pricing in essential services.

Question 10

What is a potential downside of price caps on energy suppliers?

Answer 10

May slightly reduce investment incentives

This highlights the trade-off between consumer protection and market efficiency.

Question 11

What effect did the privatisation of Royal Mail have on efficiency?

Answer 11

Increased pressure to be efficient and compete with rivals

This often leads to job losses or restructuring in the short term.

Question 12

What is a short-term effect of privatisation on government revenue?

Answer 12

Short-term revenue gain

However, long-term productivity improvements may vary.

Question 13

What is a potential impact of raising the minimum wage in the UK?

Answer 13

Increases costs for low-wage employers, possibly leading to job cuts

This reflects the microeconomic implications of wage policies.

Question 14

How does a minimum wage increase affect consumption?

Answer 14

Raises incomes, boosts consumption, may raise inflation or reduce unemployment

This indicates the macroeconomic effects of wage increases.

Question 15

What is a consequence of declining manufacturing jobs in Northern England?

Answer 15

Lower income opportunities lead to less consumer spending

This highlights regional economic disparities.

Question 16

How does regional inequality affect aggregate demand (AD)?

Answer 16

Weakens AD in deprived regions

This illustrates the macroeconomic impact of regional disparities.

Question 17

What are some benefits of JD Sports acquiring foreign chains?

Answer 17

Economies of scale reduce average costs; greater pricing power

This reflects microeconomic advantages of business expansion.

Question 18

How does foreign direct investment (FDI) affect the UK economy?

Answer 18

Increases tax revenue and productivity

This represents a macroeconomic benefit of attracting foreign investment.

Question 19

What is the effect of reduced demand on UK GDP growth post-Brexit?

Answer 19

Lower revenues for exporters and manufacturers

This highlights the macroeconomic challenges following major political changes.

Question 20

What occurs when the Bank of England cuts interest rates?

Answer 20

Cheaper borrowing leads to more business investment and consumer credit

This is a macroeconomic policy tool to stimulate growth.

Question 21

What impact does a depreciating pound have on UK exports?

Answer 21

UK exporters gain competitiveness; importers face higher costs

This highlights the effects of exchange rate fluctuations on trade.

Question 22

What is a consequence of the UK experiencing falling export prices for oil services?

Answer 22

Falling revenues and profits for oil service firms

This reflects the microeconomic effects of changes in terms of trade.

Question 23

How does government investment in levelling-up initiatives affect local regions?

Answer 23

Improves infrastructure, attracts firms, boosts local jobs and skills

This aims to reduce regional inequality and increase potential growth.

Question 24

What happens when the FCA tightens rules on payday lenders?

Answer 24

Firms like Wonga see falling profits or exit market; consumers are better protected

This reflects the impact of financial regulation on market dynamics.

Question 25

What is the macroeconomic effect of financial instability reduction?

Answer 25

Protects long-term growth ## Footnote This emphasizes the importance of stable financial markets for economic health.

Question 26

What is a consequence of rising incomes in the economy?

Answer 26

May boost consumption and inflation ## Footnote This shows the interconnectedness of income levels and economic activity.

Question 27

Fill in the blank: A _______ leads to higher costs for low-wage employers.

Answer 27

minimum wage increase

Question 28

True or False: Privatisation always leads to job creation.

Answer 28

False ## Footnote Privatisation can lead to job losses or restructuring as firms seek efficiency.