4.5.4 Macroeconomic Policies In A Global Context Flashcards
1
Q
What are economic external shocks?
A
- unexpected or significant events that disrupt the normal functioning of an economy which can lead to a sudden impact
2
Q
Factors which can cause economic shocks?
A
- natural disasters
- financial crisis
- political events
- health crisis
- technological advancements
3
Q
What are demand shocks?
A
- these are associated with a rise or a decline in spending and confidence abroad
4
Q
What are supply/price shocks?
A
- these affect the global supply and price of goods and services
5
Q
What is transfer pricing?
A
- pricing goods/services transferred within a TNC in order to reduce tax burdens and maximise profits
6
Q
What are some key policies to help absorb external shocks?
A
- exchange rate ( depreciation )
- strong non-price competition of domestic businesses
- a diversified economy
- freedom to set monetary policy when conditions change
7
Q
Evaluating the effects the external shocks?
A
- size of the external shock
- scale of shock
- is temporary or a permanent shock?
- is the policy likely to be effective?
8
Q
What are problems facing policymakers when applying policies?
A
- inaccurate information
- rich and uncertainty
- inability to control external shocks
