8- Macro policies in a global context

Question 1

Policies to reduce national debt

Answer 1

• UK austerity - cooperation tax and national insurance rise
• France austerity 2013
• Increase gov spending (HS2) - growth- higher tax revenues
• Default on loans

Question 2

Policies for poverty reduction

Answer 2

• Progressive tax system- NEED FOR WELFARE SYSTEM
• Gov spending- education and health- access for all
• To reduce wage differentials:
  Min wages
  Trade union membership
• Max prices for necessities

Question 3

Policies to increase international competitiveness

Answer 3

• Increase supply side policies- increase productivity

- Less regulation and cooperation tax- increased investment

Question 4

Policies to control TNCs

Answer 4

• In the EU and the USA, it is illegal for TNCs operating in their country to use bribery or corrupt practices anywhere in the world and they can be fined for doing so.
• Some developing countries don’t allow TNCs to set up in their country without first setting up a joint company with a local partner , meaning that some profits are
  retained within the country and knowledge/technology is transferred.
• TNCs challenged by HMRC over transfer pricing

Question 5

Problems for policymakers

Answer 5

• Inaccurate info- GDP, taxes, costs and benefits (time consuming analysis)
• Risks- hard to know when extra spending is needed
• External shocks- impacts can only be lessened

Question 6

Evaluation of cutting gov spending

Answer 6

It depends on the type of government spending you cut. If you cut pension spending (e.g. make people work longer), then there may be an actual increase in productive capacity. If you cut public sector investment, it will have a bigger adverse effect on aggregate demand and the supply side of the economy.

Question 7

Evaluation of default on loans

Answer 7

• Ruins investors savings

- Makes it hard for future borrow in capital markets