Macro essays Flashcards
(8 cards)
Assess the view that some level of inequality is desirable to maintain an appropriate incentive structure in the economy.
Incentivises people to work.
Need people to do low-skilled labour to ensure all groups of employment are being filled
Allows for R+D and innovation
Evaluation - not motivating due to inheritance, if more people don’t have money crime rates may increase
Discuss the role of the financial sector in the growth and development of developing countries
- Provide forward markets so farmers with volatile incomes have a set plan income so they can invest into their business and increase efficiencyE -time lag, they may not have enough of their own currency to buy another currency at the time
- Microfinance E - volatile incomes so may not have enough savings anyway and a lot of paperwork and admin is required so high barriers
- facilitate spending
What are forward markets?
Purchase of a currency in advance to buy goods and services in that currency upon the agreed price
How much of government revenue is council tax?
30%
Likely impact on UK economy of an increase in consumption?
-rise in multiplier as more spending in economy and firms are making more profit so they can invest more, injection so improve quantity and quality of production making more competitive
E- time lag
- rise in AD increasing output, increasing growth,
E- will increase price level
What policies could government use to increase UK productivity?
- more education/training to increase skill level
- increase apprenticeship and quality of them
- more healthcare to ensure less time taken off
improved infrastructure - faster broadband/internet so businesses work quicker and communicate with foreign brands efficiently
E-opp cost, may have time lag, eg cross rail only affects London so depends on size of impact
What are the limitations of using GDP to compare living standards between the UK and rest of the world?
- hidden economy -output is not recorded or sold, so no resulting income
- doesn’t factor income distribution
- quality of life is hard to measure
- population growth in developing countries may account for most growth in GDP
E- easy to measure and is globally understood, other measures may be better such as GNI
