application uk eocnomy

Question 1

Summarise the supply side challenges the uk economy is facing?

Answer 1

Low levels of labour participation 20.2 -21.3% inactivity rate lowering the quantity of labour shifting LRAS left

Low levels of investment 18% - austerity after 2008 Brexit uncertainty pandemic

Relatively low educational achievement

Question 2

Summarise the current growth situation in the UK

Answer 2

Short run - weak bounce back after the pandemic most other countries now have larger economies than before the pandemic
Long run - trend growth running at 1% per year reflecting weak productivity growth and the above supply side challenges

Question 3

List three potential policies needed to deal with these challenges

Answer 3

Givemrnet investment in R and d infrasture education deregulation immigration polices
However any internationalist supply side policies is now not sustainable in the uK due yeti their high level of debt

Question 4

Give two reasons for low levels of consumer confidence

Answer 4

High interest rates and rising mortgage payments
Cost of living crisis
State of the economy rising unemployment, covid/panmdeic effects

Question 5

Link the current levee of consumer confidence to the value of the multiplier

Answer 5

Low consumer confidence results in a low value of MPC. Multiple is 1/1-mpc therefore a low multiplier for a given injection there is a relatively small increase in total expidenture

Question 6

Use the supply side context of the uk economy to evaluate high levels of inward migration

Answer 6

In the context of low productivity growth high levels of migration is important to expand the supply side of the economy increase trend growth above 1% high labour force inactivity rates