4.5.4 Macroeconomic policies in a global context Flashcards
What does “Defaulting on loans” mean?
A way for the government to reduce national debt.
When a government defaults on its loans, it means it stops making payments on its debt obligations.
This is usually a last resort as it can cause long term problems.
How have the UK government been reducing national debt?
Policy of austerity since 2010. They are decreasing spending. They can also increase taxation.
Both of these are unpopular and can limit growth.
How can the government reduce wage inequality?
- National Minimum Wage.
- Maximum wage.
- Equal pay legislation (between men and women).
- Trade union legislation.
- Improve public education and training opportunities.
What is wrong with America’s tax system?
It is progressive, however it does not have a welfare system that can take advantage of the progressive nature.
I.E the tax system is progressive but the government fails at redistrubiuting it.
What is trickle down economics?
Free market economisist belief that increasing the incomes of the rich will lead to an increase in the income of the poor.
They also believe reducing their income would reduce employment and that inequality is necessary to encourage people to work hard.
What does the law of diminishing marginal utility suggest about inequality?
The law of diminishing marginal utility suggests that redistribution increases total utility and therefore is a better allocation of resources.
Why might the central bank change interest rates / monetary supply?
Domestic reasons - control inflation.
Global issues - influence exchange rate.
What are external shocks?
External shocks are unexpected events that come from outside a country’s economy and can significantly impact its growth, inflation, and stability.
Evaluation for TNCs influencing politicians / bribing?
In the USA / EU TNCs operating in their country cannot use bribery or corrupt practices anywhere in the world - they can be fined for doing so.
Also some developing countries dont allow TNCs to set up in their country without first setting up a joint company with a local partner, meaning some profits are retained in the country and they rely less on a TNC.
What is transfer pricing regarding TNCs?
Transfer pricing is one way for firms to engage in tax avoidance.
This is illegal and challenged by the HMRC in the UK which has led to billions of pounds earnt in taxes.
What are the 3 core problems facing policy makers?
- Inaccurate information
- Risks & Uncertainties
- External Shocks
