Section B Flashcards
(10 cards)
6 (a)Explain the term to investment
An increase in capital stock for the economy.
In 2015 investment increased by 4 % and in 2016 investment decreased by 2%
6 (b) explain two influences on the level of uk investment
1: business confidence - firms will only invest if there is less uncertainty about future costs.
Therefore firms are reluctant to commit to capital spending while there is economic uncertainty
2: demand for exports - the lower demand in a country to which a firm is trying to export the less investment.
May lead to uncertainty over the uks future trade relationships discouraging companies from investing
6 (d) explain one likely reason why the uk gov expects the uk economy to perform better than Germany and Italy
May be a slowdown in economic growth of trading partners
When Germany and Italy encounter a lack of demand for their exports there is a fall in the net trade component of their AD
As Germany and Italys contribution of exports to economic growth is higher than the uks as they are consumption only.
6(g) What is a supply side policy
A government policy that aims to increase aggregate supply in an economy
6(g) what is productivity
The average output produce per unit of a factor of production
6(g) first paragraph
Increase gov spending on education and training
Helps skills and productivity across various industries
Can improve on infrastructure
Reduces costs , improves efficiency leads to enhanced productivity in long run
However time lay for supply side policies can make it challenging to assess the effectiveness
6(g) second paragraph
Reducing benefits or income tax
Can incentivise employment + increase output per worker of those in work and increase the numbers of workers potentially boosting productivity
However could backfire as workers could choose to work less maintaining the same amount of income.
6(g) third paragraph
Increasing competition through privatisation
Helps innovation+ efficiency and reducing x-inefficiency
However, may lead to private monopolies and even less efficiency and low economic growth
To avoid - deregulation
6 (e) discuss the likely impact of a recession on the uk economy
P1: receive lower average incomes not be able to afford more goods nor increase SOL
Poverty rates may rise and house prices decrease driving demand to go down
However lower demand may reduce demand pull + cost push meaning central bank may lower interest rates to control inflation
P2: firms are likely to make less profit as consumers spending falls. Less production p, implying low investment to innovation
However may lead to lower inequality those with assets may whiteness a rise in market value of their income on their wealth.
6 (c) asses the limitations of using gdp to compare living standards over time
P1: distribution of income as growth varies across the country with jobs and wages spread unevenly Can lead to unfairness in income + job opportunities
Other measurements may be better such as GDP per capita as it gives an indication of average incomes which is key to living standards
P2: size of public sector spending which may or may not improve standard of living. Standard of living is subjective and cannot be measured effectively and accurately
