Application (Economic News)

Question 1

Evaluating Tariffs as a form of Protectionism - Trump-China Tariff Trade War

Answer 1

• in evaluation, using tariffs as a form of protectionism may lead to negative economic implications
• the country can impose retaliatory tariffs which could contribute to a trade war
• this can be seen currently with China’s imposition of 84% tariffs on the US after Trump’s protectionist policy (April 2025)
• this can harm international relations, leading to reduced exports and an increase in the size of the current account deficit
• it can also lead to increased costs for American businesses who rely heavily on raw materials from China e.g. Apple and China

Question 2

Using tariffs to protect infant industries context

Answer 2

• US steel industry in the 19th century
• in early stages of its development, US steel was an infant industry (high EoS, lack of market familiarity) and struggled to compete with more mature European steel industries
• US gov implemented high tariffs to promote the domestic industry, allowing it to grow and become competitive

Question 3

Structural unemployment context

Answer 3

• Lloyds Banking Group is closing 136 branches across the UK due to the shift towards online banking
• they are set to cut about 1600 jobs across its branch network
• despite some new roles being created in areas like customer service, there is a net loss of jobs

Question 4

Annual growth rate of 2024 UK economy

Answer 4

• 1.1%

Question 5

GDP per capita in UK

Answer 5

• 36000 GBP

Question 6

Total UK GDP and % of it in services and manufacturing industries

Answer 6

• 2.851 trillion GBP, 79% from services, 14% from manufacturing

Question 7

UK unemployment rate

Answer 7

• 4.4%

Question 8

UK youth unemployment rate

Answer 8

• 13.3% (sign of a weak labour market)

Question 9

Consumer confidence in the UK

Answer 9

• very weak since the cost of living crisis
• higher taxation e.g. council tax
• tariff uncertainty

Question 10

CPI inflation

Answer 10

• 2.6%
• currently experiencing disinflationary pressures

Question 11

UK current account deficit

Answer 11

• 2.6% of GDP

Question 12

National debt in UK

Answer 12

• 95.5% of GDP
• use of contractionary fiscal policy has begun

Question 13

BofE base interest rate

Answer 13

• 4.5%

Question 14

Income tax bands frozen until when?

Answer 14

• april 2028
• forecast to earn gov an extra 45bn pounds a year by 2028
• freezing taxes essentially equal to raising them as wages rise on par with inflation

Question 15

Economic development context

Answer 15

• in 1970’s, Deng brought China under a market economy, incentivising hard work and bringing 700 million people out of extreme poverty
• created 4 Special Economic Zones (SEZ’s), they were subject to unique economic regulation and allowed in FDI
• China now one of worlds largest exporters, accounting for around 14% of worlds exports

Question 16

Supply-side policies context

Answer 16

• in 2019, the UK government spend 400 million pounds on improving schools, and pledged to raise teachers salaries to 30k by 2022
• rise in teachers wages -> more motivated teachers -> higher quality education -> improved quality of human capital in future workforce

Question 17

Monetary policies context

Answer 17

• after Brexit, the Bank of England reduced interest rates to 0.25%, in an attempt to stimulate demand
• was done pre-emptively to prevent a GDP decline due to Brexit uncertainty
• high levels of quantitative easing have occured in response to the pandemic

Question 18

Example of IMF bailout and implications

Answer 18

• in April 2025, Argentina have been bailed out by the IMF for the 23rd time
• the bailout was a $20 billion Extended Fund Facility (EFF)
• supports economic growth by providing financial assistance to reduce debt, foster investment and support job creation
• can also help to ease strict currency controls, which may boost investor confidence and attract more private investment