2.6.3-2.6.4 Flashcards
1
Q
What are supply side economies?
A
- Policies aimed to increase the productive potential of the economy and move supply curve to right.
- Can be improved through investment
- Use it to speed up or increase improvements
2
Q
What are market based policies?
A
- Are policies which are designed to remove anything that prevents free market working efficiently, Causing lower output and higher prices.
- Include people who do inefficient production or the people who are unwilling to work
3
Q
What do free market economists think about about market based policies?
A
- Argue for it as they say they want the government to have a small role as possible. Economists who support interventionist policies suggest free market is not as efficient and government need to intervene and improve it
4
Q
What happens when you increase incentive policies?
A
- By getting more people to go to work or firms employ people government will increase size of workforce and more goods and services produced.
- A reduction of benefits/ taxes will increase opportunity cost of being out of work and people are better of working then claiming. Why they introduced UC.
- They could encourage workforce back e.g woman get free childcare and flexible hours
- Reducing national insurance taxes on firms will get more firms to employ people
- Removal of minimum wage will also get more people to employ
5
Q
Explain policies to promote competition?
A
- Privatisation, selling nationalised companies to private sectors, or reducing restriction on businesses which restricts them to enter the market makes firms more competitiv
6
Q
What is a competition policy?
A
- Used to prevent monopolies and make price fixing agreements illegal.
- CMA makes sure market is competitive
- Competition is needed to make firm more efficient as they can get it more cheaper or a better service.
- Free market economists say government has little incentive to cut costs or innovate
- However deregulation can lead to poorer service and cause environmental services.
7
Q
Explain policies that reform the labour market?
A
- By increasing retirement age more goods and services are produced.
- Labour market could be more flexible in order to make it more efficient as it can respond to changes.
- Reduction of benefits will increase incentive for people to work and help reform labour market.
8
Q
How can the labour market become more flexible?
A
- Weakening Unions. E.g Introduced postal ballots, banned secondary picketing and reduced it to 7 people.
- Unions have to give 14 days notice before strikes.
- Trade unions push up wages which leads to union laying off workers .
- Change employment contracts for example 0 hour contracts
- Making it easier to change jobs through higher mobility. Or easier to sack people
9
Q
Explain policies that improve skills and quality of the labour force?
A
- Increase spending on education and training to make a more educated workforce who will be more efficient and able to do better jobs. Making more goods and services.
- Gov could introduce regulation which focuses on business training their staff to keep up with development
- An increase on high skilled migrants improves quality of workforce.
- However increasing spending on education is useless if it has nothing to do with the job and cause an opportunity cost of the money being able to be spent somewhere else
10
Q
Explain Policies about improving infrastructure?
A
- Done through offering tax incentives or subsidies on investment. E.g Businesses who invest profits pay less taxes.
- Gov could spend money to improve infrastructure themselves
- ## New tech developed and more people will buy more technology. Meaning production is more efficient
11
Q
What are issues about policies which improve infrastructure?
A
- Offering tax breaks can effect gov budget as it means they will lose a lot of tax revenue. Some companies will not invest its money and use it as tax evasion
12
Q
Explain economic growth vs protection of environment?
A
- As economy grows we expect more resources to be used. As we produce more goods we produce more pollution ,noise and habitants.
- Economic growth has been rapid in china and lead to serious levels of pollution. Economic growth can be done without damaging environment but will be slower and higher costs
13
Q
Explain Economic growth vs balance of payments?
A
- Some countries like India have seen rapid economic growth from balance of payment problems.
- Country is so big it is producing goods for it people and wealth of its people but has lead to demand of imported goods.
- China has seen good economic growth from making its own goods
14
Q
Explain Expansionary and deflationary fiscal monetary policies?
A
- expansionary policies will increase AD to increase output and employment but will lead to increased inflation and may worsen balance of payments as some goods will be imports
15
Q
What are the effects of increasing interest rates?
A
- Reduces inflation – people borrow and spend less.
- Hurts long-term growth – businesses invest less.
- Stronger pound – exports fall, imports rise (bad for trade balance).
- Affects wealth –
- High rates help savers (often older people).
- Low rates increase inequality (rich aren’t affected much, but others earn less on savings).
16
Q
What are supply-side policies and their effects?
A
- Aim to increase supply and boost long-term growth.
- Can lower long-term inflation, but may raise it short-term if they increase demand.
- Policies like cutting benefits or reducing union power can hurt the poorest, increasing inequality.
- May also harm the budget or the environment.
17
Q
What happens when the government tries to reduce a fiscal deficit?
A
- They may cut spending and raise taxes.
- This can lower demand, causing slower growth and more unemployment.
- If the economy shrinks too much, tax revenues fall, making the policy less effective.
- Hurts the poor most, as they rely more on public services.
