Hot topics Flashcards
(27 cards)
Interventionist SSPs
-G on education/training, healthcare, infrastructure (economic inactivity, UE, growth)
-Subsidies/ tax credits
(growth)
Tax reform SSPs
-Reducing income/corporation tax
(UE, investment, regional growth)
Labour reform SSPs
-Reducing benefits (UE/ inactivity)
-Reducing min wage (competitiveness)
-Weakening TUs
(UE, competitiveness)
-More immigration (growth)
Competition SSPs
-Privatisation (investment/productivity)
-Deregulation
(competitiveness, regional growth)
-Trade liberalisation
Fiscal Policy background
-High deficit during and since covid, leading to high debt interest, inflation and wage growth
-Liz Truss unfunded tax cuts and G spending, panic selling of bonds and pounds
-Contractionary fiscal policy since
UK contractionary fiscal policy
(taxation)
-Tax brackets frozen to 2028 (stealth tax, equal to 7% rise)
-Corporation 19% to 25% and NI increase for employers
-Windfall on energy market
UK contractionary fiscal policy
(spending)
-Cuts to benefits
-Cuts to healthcare, education, transport, council budgets
-HS2 stage 2 axed
Pros of contractionary fiscal policy
-Confidence in govt finances, so bond interest will fall
-Reducing future burden and giving flexibility for future fiscal policy
-Reduced demand-pull inflation
Cons of contractionary fiscal policy
-Reduced growth and E
-Living standards
-Laffer curve and brain drain
-Inequality (Gini 0.34 to 0.357)
UK championing free trade
-71 free trade deals since BREXIT 2020 (Singapore, South Korea, EU)
-Ongoing talks with USA & India
Pros of UK free trade
-Comparative advantage (growth)
-Low prices, more choice
-Larger markets for firms
-FDI
-Technology diffusion
Cons of UK free trade
-Domestic industry harm (Dairy and meat from NZ/Australia)
-May be greater increase in imports than exports, as UK only has comp.adv. in services
Eval of UK free trade
-Extent of trade with certain countries
-Non-tariff barriers (EU standards have to be checked)
-Domestic harm
USA trade wars
-2019 tariffs on $360bn worth of Chinese imports (Dumping, UE, trade deficits)
-Biden tariffs on electric cars, semi-conductor chips (Infant industries)
-Trump tariffs 2025
Trump tariffs 2025
-25% on all steel & aluminium
-10% baseline for all countries
-China retaliation 125%, USA put 145% on Chinese imports
-To raise gov rev, decrease debt, inward investment (avoid tariffs)
Eval of USA trade wars
Seen in 2019:
-Retaliation, China targeted most valued US exports (soy beans, oil)
-Supply side shocks (cost of raw materials)
-Higher prices & inflation
-Regressive, so inequality
-Demand side shock in China
-Original reasons not achieved
Why does Vietnam have high predicted trend rate growth (7%)
-Free trade and FDI, especially with neighbours that are also growing rapidly
-Investment on education/training, so increased human capital
-Large, young workforce, low unit labour costs
Comparative advantage examples
China - Solar panels
Denmark - Wind turbines
Netherlands - Flowers
Reasons for falling inequality in China (although still high)
-Rural-urban migration
-Investment in high speed rail
(increasing mobility)
-Spending on healthcare, education, pensions
Rent cost in London
65% of median disposable income
Reasons for UK economic inactivity
-Long term sickness post pandemic
-Mental health issues
-Childcare (women underrepresented in workforce)
Main fiscal policy issues UK
-Almost 100% national debt
-Highest tax burden for 70 years, fiscal drag
-Pressure to raise defence spend
-Need for reducing debt vs need for spending on NHS & SSP
Ways to decrease national debt UK
-Growth, so more tax rev and lower debt as % of GDP (esp combined with frozen brackets)
-Cut spending (welfare)
-Increase tax (NI on employers)
Cons of monetary policy to increase growth
-Low confidence, high credit card interest rates (27%) may cause liquidity trap
-High MPM
-Inflation
