Macroeconomic Policy

Question 1

Explain reasons why the Macro- supply curve might shift to the right

Answer 1

• supply increase per. price
  
  • tech. innov.
    -inno. legislation

Question 2

Give reasons why the macro-demand cuve would shift to the right

Answer 2

-inc. tax decrease

Question 3

Explain the macro-demand curve when aggregrate demand increases

Answer 3

• gen. price level incr.
  -real GDP increases

Question 4

Explain Keysenian policy on how to increase GDP

Answer 4

-Supply given
-supp. curbe given
-more expend. = more GDP
- So incr. Demand
-incr. gov. exp.
-incr. priv. exp.
-multip. effect

Question 5

Explain the Keynesian budgetary policy AS curve

Answer 5

AS= Agrregrate supply
-Supply potential stays consistent, until
-used up capacity
-then price incre.

Question 6

Explain the Supply Side’s view on how to increase GDP

Answer 6

-incentivise increased supp.
-thru lowering TAXES
-higher GDP
-incentivise 2 take up labour

Question 7

Explain the supply side’s opinion on whether lower taxes lead to less gov. rev.

Answer 7

• to SOME extent
  -but at first increases (laffer curve)

Question 8

TRUE or FALSE: significant increase in demand oftentimes results in inflation

Answer 8

-TRUE

Question 9

‘Keynesian policy is more imprecise than Supply Side Budgetary Policy’ Argue for or against this statement.

Answer 9

FOR
-Hard to reach sweet spot, when rely on dem.
-too little stimulation of AD:
-no effect
-too much stimulation:
-infl. + budg. deficit

                   \+

LIMIT. budget deficit
stim. comp. 2 invest (long term)

Question 10

Explain the weaknesses of the supply side fiscal policy

Answer 10

-too little stim. of AD

Question 12

Explain the benefits of harmonisations

Answer 12

• Lower TCS for FIRMS+ CONS.
  -same rules + rights

Question 13

Explain the costs of harmonisation

Answer 13

1. remaining leg diff. limit TC reducation
   -diff in interp.
   -diff in loval case law
2. No free movement of leg. rules/ judgments now
   -comp. btwn MS rules: may the least TCs win
3. One size fits all could redu. welfare

Question 14

Explain what expansionary legal policy is

Answer 14

• use of COURTs, ADM. + REGU. 2 further stimul.
  overall dem. 4 goods and serv. during a recession

Question 15

TRUE or FALSE: capital req. usually reduce during a recession

Answer 15

-true

Question 16

Describe the fisher equation of exchange

Answer 16

M x V= P x T
-M–> money supply (circulating in economy)
-V–> velocity of money
-P= general price level
-T= number of transactions
-value money flow= value flow of goods

The total amount of money spent in the economy (left side)
is equal to
the total value of all goods and services sold (right side).

-only if T cannot increase further, P will increase

Question 17

TRUE or FALSE Globalisation is the encgine of economic growth, not the accelarator of economic crises

Answer 17

-FALSE

Question 18

List potentially risky government failures in response to economic crises

Answer 18

-over regu.
-protectionism
-limit market forces