economics application Flashcards
examples of national debt effect on economy
Greece-higher unemployment
Zimbabwe-hyperinflation
example of tariffs
EU 39.7% tariffs on Chinese titanium oxide- helped domestic titanium oxide producers, but hurt domestic paint producers
examples of factors that lead to an increase in international trade
specialisation:
Saudi Arabia-oil-increase
china-textiles-decrease
examples of devaluation increasing competitiveness
Japan:
weaker yen led to an increased competitiveness in the Japanese automobile industry
Argentina:
peso allowed to float freely which led to devaluation which, whilst initially it made Argentinian exports more competitive, in the long run it caused rampant inflation which increased the price of exports
examples of increased investment in infrastructure increasing FDI
United States -
Infrastructure Investment and Jobs Act
Argentina’s Transport Infrastructure-
has invested in improving its transport infrastructure, However, the country’s volatile economic conditions have limited the potential effectiveness of such infrastructure investments in bringing significant foreign capital. Investors remain cautious due to the risks associated with political and economic instability.
“quantitative easing caused more good than bad”-asses
quantitative easing is a monetary policy used by central banks to stimulate the economy when standard monetary policy tools have become ineffective.
One effect that quantitative easing may have is increasing money supply.
an example of this is when During the global financial crisis, the Federal Reserve initiated several rounds of quantitative easing, which significantly increased the Federal Reserve’s balance sheet, from around $900 billion in pre-crisis 2007 to over $4.5 trillion by the end of 2014.
However, it can also be argued to increase wealth inequality.
for example when the United States used quantitative easing in 2008 the benefits of QE disproportionately favoured wealthy individuals and large corporations while failing to stimulate broad-based economic growth, leading to concerns about long-term economic instability.
another effect that quantitative easing may have is improving economic growth.
an example of this is the Bank of Japan’s engaging in quantitative easing for many years, especially to combat deflation and stimulate economic growth.
However, this can lead to inflation.
an example of this is when Zimbabwe’s government engaged in aggressive money printing in the early 2000s to finance deficits, leading to hyperinflation.
give two supply side policies that could be used to reduce inflation
Supply-side policies are designed to increase the productive capacity of the economy, thereby improving supply and potentially reducing inflationary pressures.
one supply side policy is investment in education.
One example of this happening is Finland which has invested heavily in its education sector, focusing on teacher training and providing access to quality education, the result has been a highly educated populace capable of adapting to changing economic conditions and contributing to a stable economy. By ensuring a steady supply of skilled workers, Finland can better meet the demands of its economy, helping alleviate upward pressure on prices.
However, investment in education could also increase the price of labour.
One example of this happening was in the United States.
another supply side policy to reduce inflation is Deregulation.
one example of this working is the Gramm-Leach-Bliley Act of 1999 which removed barriers between commercial banks, investment banks, and insurance companies, fostering competition in the financial services sector. The increased competition often leads to better interest rates and lower fees for consumers, contributing to managing inflation through lower costs in financial services.
however it can also create more volatile prices. One example of this happening was in the 1990’s and early 2000’s
when deregulation led to a riskier financial environment that contributed to the housing bubble and ultimately led to the 2008 financial crisis. The aftermath saw not just economic contraction but also inflationary pressures driven by the massive monetary policy responses (e.g., quantitative easing) aimed at stabilizing the economy.
