3.1: Globalisation Flashcards
How can expansionary monetary policy promote short term rapid real GDP growth?
Interest rates decreased,
less incentive to save,
more incentive to spend,
cheaper to borrow,
investing increases,
injections in economy increase
Why hasn’t the govt enforced expansionary monetary policy at the moment?
Aggregate demand increases, leading to inflation,
inflation is already high at the moment so do not want to further increase,
no oil from Russia + wheat from Ukraine,
commodity price increases,
cost-push inflation
How can expansionary fiscal policy promote short term real GDP growth?
Taxes are cut,
government spending increases,
increasing injections,
increasing aggregate demand
How can a favourable exchange rate promote short term real GDP growth? WITH EXAMPLE
Weak pound,
imports dear,
exports cheap
E.G: China,
govt has lots of control over economy,
Yuan purposefully held low,
focus on export-led growth,
developing countries often focus on this,
average income of population lower so less demand,
overseas population has higher average income,
higher demand,
stimulates growth
Give 4 examples of long term causes of real GDP growth.
Increased investment spending on a country’s productive capacity
Growth spillovers from invention and innovation
Growth benefits from increased government spending on public goods, merit goods and other infrastructure (schools + hospitals)
Expanding population and growing active labour supply
Describe fiscal deficit
Low taxes + high spending,
Increased borrowing - harder to borrow now, due to huge levels of govt borrowing previously,
2008 + 2020 - bailing out banks in FC and covid-19
interest payments - BHM?, situation
Spending differences for different tax cuts
Working people - more likely to be spent, injections into economy
Super rich - more likely to be saved overseas etc
What are the main 4 benefits of economic growth?
Higher living standards - Real GNI per capita
Stimulates jobs and contributes to lower unemployment rates - helps reduce income inequality
Fiscal dividend - higher economic growth raise tax revenues + reduce govt spending
