paper 2 25 markers Flashcards
(14 cards)
Impact of measures which a government could take to reduce the economy’s national debt. Refer to a developed economy of your choice in your answer
specification
define national debt
1. running budget surplus (austerity)- reduce govt spending, increase tax
2. policies to increase economic growth (fiscal stimulus, exchange rate devaluation)
3. policies to reduce tax avoidance
4. privitisation
Eval:
1. austerity decrease economic growth, opposite effects
2. effectiveness of austerity depends on balance
3. policies for economic growth are usually expensive
Evaluate factors which may have caused increase in income inequality. Refer to developed economy of your choice in your answer.
specification
define income inequality
1. increase quality of education and skill
2. increase globalisation and trade liberalisation
3. changing technology, increase automation
4. increase incomes of those who own assets
5. 2008 financial crisis
Eval:
1. different reasons in different countries
2. depend what economy specialises in
3. prioritisation of factors
4. financial crisis only short term
evaluate the likely effects of an increase in protetionism on the economy of a developing country
2017
KAA
1. fall in living standards and output
2. cost push inflation
3. retaliation and price war
4. produce things that they have no comparative advantage
5. reduce in exports
Eval:
1. thriving local economy
2. extent of increase in protectionism
3. extent of dependency on world trade
4. may lower after recession is over
Evaluate the likely macroeconomic consequences of a significant fall in global oil prices.
2017
KAA:
shifting AD and LRAS
1. decrease in price for consumers
2. oil importing countries have less debt
3. narrowing trade deficit
4. increase tax revenue from more economic activity
5. decrease cost of production for firms-> increase in gdp
Eval:
1. increase in externalities
2. depends on how long prices stay low
3. reduction in employment in oil sector
4. declining tax revenue from oil sector
5. more external debt from oil exporting countries
Evaluate the likely economic effects of this planned increase in government expenditure (25 billion pounds over 5 years on innovation and infrastructure).
2018
KAA
1. increase govt spending increase AD
2. improvement in UK productivity (new ways of working that could boost growth)
3. increase international competitiveness and improve BoP
4. improve infrastructure like transport boost productivity
5. injections in circular flow and multiplier effect
Eval
1. 25 billion pounds is not a lot over 5 years
2. need significant boost to catch up international competitiveness
3. no guarentee innovation boosts growth
4. depend on effectiveness of allocation of resources
5. poor infrastructure need significant amounts of money to improve
To what extent will a depreciation of the pound impact on furute economic growth in the UK.
2018
KAA
1. increase demand for exports (cheaper), improve AD
2. reduce demand for imports (more expensive), improve BoP and AD
3. imported inflation (necessities)
4. attract inwards investment
Eval
1. imported inflation will be a problem if real wages don’t increase
2. depends if it’s a temporary or permanent change in exchange rates
3. Marshall- Lerner condition and J- curve
4. depend on UK exchange rate with other currencies
Evaluate the effects of growth of trading blocs such as the TFTA on global trading patterns
2019
KAA
1. trade creation (domestic production is replaced by with more efficient imports from a member of the trading bloc)
2. more trade within trading bloc
3. increase exports because of the larger market
4. increase imports as removal of protectionism
5. increased specialisation (comparative advantage)
Eval:
1. trade diversion (countries purchase from less efficient countries)
2. products may be still cheaper outside of bloc because of economies of scale
3. effect only in africa
4. conflict with WTO rules
5. other factors like infrastrucutre affect ability to import and export
Evaluate the impact of a large fiscal deficit and national debt on a country’s economy.
2019
KAA
1. reduction in govt spending-> impact on AD and multiplier
2. high contractionary fiscal policy in the future to pay off debt
3. crowding out (increase purchase fo govt bonds-> inflation-> reduction in chance of private investments)
4. high interest costs to service debt, less money to invest in public services, lower standard of living
5. reduction in FDI, impact exchange rats
Eval:
1. higher debt means they are investing into the economy-> further economic growth
2. short term fiscal deficit can balance out surplus in the long term
3. redistibution of income
Evaluate the likely impact of cutting tax rates as a policy to increase economic growth.
2020
define expansionary fiscal policy
draw AD/AS diagram
positively impact the economy
1. firms have more profits to reinvest-> increase AD (investment)
2. consumers have higher disposable income-> increase AD (consumption)
3. greater injections in circular flow of income
4. less withdrawals from circular flow of income
5. increase size of multiplier
6. less incentive for tax evasion
negatively impact economy
1. firms may not reinvest money-> other factors that influence investment
2. consumers save extra disposable income (withdraw from circular flow)
3. result in higher govt debt-> crowding out
4. govt have less money to spend on other sectors like education-> affect economic growth
Evaluate possible economic causes of income and wealth inequalities within a country such as Brazil.
2020
define wealth and income inequality
reference to both income and wealth inequality separately
KAA
1. high levels of corruption leading to government inefficiency/ failure to axt in best interest of general population
2. lack of redistributive fiscal policy (regressive)
3. high indirect taxes which tend to be regressive
4. inequality in access to or quality of education/ healthcare
5. rural/ urban divide with people in urban areas having a greater variety of job opporunities and higher wages
6. weak trade unions reduce power of workers to insist on higher wages
7. high levels of inheritance that is not significantly taxed being passed onto future generations (wealth)
8. owernship of financial assets concentrated amongst wealthy-> lack of public share ownership
Eval:
1. signigicance/ magnitude of specific causes
2. causes may be solved over time as the economy grows and income levels rise
3. significance of competing causes could be discussed
4. consider whether there is a link between the two types of inequality
Evaluate the effectiveness of quantitative easing during ‘a significant recession’ (EU).
2021
KAA
1. provide banks with more funding-> lend more to business to increase investments
2. more funding to banks-> increase lending to consumers
3. stop people from anticipating a drop in price from prolonged recession
4. additional monetary policy tool after cutting IR as no one has responded
5. another way to reduce interest rates and boost confidence
Eval
1. banks use QE funding to improve their own financial stability instead of lending more
2. lack of consumer and business confidence to demand loans
3. consumers and firms increasing savings due to concerns of eurozone economy
4. limited by contrationary fiscal policies in some countries
5. significantspare capacity in european economies during recession that QE can’t make up for
6. inflationary
7. different countries-> cannot use same approach
Evaluate the potantial trade offs between environmental protection and other macroeconomic objectives.
2021
KAA (trade offs)
1. higher economic growth (more energy usage for economic growth powered by non renewable sources)
2. inflation-> increase costs for firms, push up prices
3. income inequality-> replacing non renewable energy costs a lot-> increase price for poor people
4. unemployment-> lose jobs from polluting firms that are forced to shut down
Eval (trade offs may not occur)
1. increased economic growth-> more money to invest in environmentally friendly solutions
2. firms increase their efficiency and R&D some environmentally friendly products
3. long term renewable energy will be cheaper, not subject to world oil and gas prices fluctuating
4. many new jobs created in renewable energy and environmental sector
Evaluate the likely impact of an increase in protectionism on the global economy.
2022
KAA
1. higher prices for consumers (especially products that can’t be produced domestically)-> increase inflation
2. higher prices for consumers as domestic firms have less competition
3. less choice for consumers
4. reduction in comparatice advantage globally leading to less productivity and less output
5. deadweight welfare loss
6. reduce number of firms exporting because of increase costs-> reduce global competition, lower global gdp, higher global inflation
Eval:
1. depends on levels of tariffs that countries introduce
2. may only be short term trade wars
3. WTO enforce global trade rules to make sure countries don’t distort international trade
4. comparative advantage encourage over dependence
5. protection of domestic industry help protect domestic employment and income-> reduce global inequality
6. protect infant industries-> allow them time to grow and expand in order to benefits from economies of scal to compete internationally
7. protection of an economy from a foreign country-> dumping products on country
Evaluate the likely impact of globalisation on the global economy.
2022
KAA:
1. increase global trade
2. increased global output with reference to comparative advantage
3. increase incomes in LEDCs due to growth of export industries and investments from MNCs
4. increase global competition between firms-> lower prices
5. increase global supply-> less inflationary pressures
6. growth of multinational corporations
7. increased migration reducing unemployment globally
Eval:
1. growth of protectionism-> restrict global trade
2. over- reliance on imports encourage domestic production alternatives
3. increased exploitation of MNCs of workers in countries with weak regulations
4. increased pollution
5. increase inequality as some industries close down due to competition from abroad
6. structural unemployment in some countries if industries more abroad
