Case Studies - Theme 2 Economics

Question 1

Examples of supply side policies:

Answer 1

• The UK Government privatised Royal Mail in 2013 to boost competition and investment. It raised £2bn from the sale.
• The government is investing £55bn in a high speed and efficient train service, called HS2. Once complete, estimates suggest HS2 could boost the economy by £15bn every year.
• In 2018, the UK Government announced an additional £20bn for the National Health Service by 2023.

Question 2

Example of hyperinflation:

Answer 2

Since 2014, Venezuela has been suffering from Hyperinflation. In 2018, the inflation rate was over 1 million%

Question 3

Example of deflation:

Answer 3

Japan began suffering from deflation in the early 1990s and in 2016, prices fell by 0.5%. This was due to a tight monetary policy (high interest rates), ageing and falling population, reducing consumption and falling property prices, resulting in a negative wealth effect.

Question 4

Example of a demand-side policy: monetary policy - interest rates:

Answer 4

In December 2007, the Bank of England cut the interest rate from 5.75% to 5.5% to encourage consumers to spend and firms to invest.

Question 5

Example of a demand-side policy: monetary policy - Quantitative Easing:

Answer 5

The aim of QE is simple: to boost spending and investment in the economy. The most recent round of QE was in March 2020 of £560 billion.

Question 6

Example of a demand-side policy: fiscal policy

Answer 6

Discretionary Fiscal Policy: After the financial crisis in 2007, the Uk Government increased spending significantly to boost aggregate demand.