essay titles Flashcards
FDI good or bad (developing countries)
P1- good
FDI can increase the rate of employment reducing poverty.
Eval Often FDI brought about by relaxed regulation, this can lead to an exploration of workers
P2 bad
Profits are often withdrawn and sent to shareholders in a host country. Leakage from circular flow
Eval : wages still contribute
Other paragraphs
Bad- countries become over reliant on FDI. This makes them vulnerable to FDI relocation
Eval- lays out the foundations of economic growth with a shift in labour from primary to secondary sector.
Is economic development dependant on economic Growth
Yes - Economic growth leads to an increase in wages and employment rates. Higher national incomes means people have more disposable income to spend = a higher quality of life.
eval- May not be the case if government is corrupt. Corrupt government can lead to an unequal distribution of wealth through the exploitation of workers through low pay and long hours. Seen in early stages of Chinese industrialisation.
No- Economic development can and has occurred without growth. This happens when countries see excessive amounts of aid. Eg Haiti 2010. Means that Growth is only present in the short term. Want of these aid loans have conditions that don’t favour economic growth.
Eval- this aid can be used to rebuild infrastructure that will help to contribute to economic growth in the long run
How to fix national debt
P1 - SSPs - increased LR growth (with infrastructure)
Eval - problems with supply side policys such as time it takes
P2 - crowding out effect
Eval - crowding in - injections in will cause incresed confidence in the economy which will cause there to be an increase in private sector spending.
AOPs - national debt can be caused by tax cuts to increases incentives.
Eval - Laffer curve
Protectionist policies
P1 : Tariffs
eval : increased prices for domestic consumers and firms. Increase consumer prices on essential goods can cause increased income equality. Which can cause cost push inflation in economy.
P2 expanisonary monetary
Or increased taxes
Political suicide
AOP : Embargoes (bans) - usually political or enforcing laws
eval : Trade wars, danger that one country imposing restrictions will lead to retaliatory action by another.
Quality controls for developed countries
International trade good or bad
P1 : good
Countries cant produce everything they want and need, international trade gives them access to products they would be able to produce themselves eg. tea, rice. Make use of comparative advantage meaning more efficient allocation of resources
Eval : Some countries with low factor endownment will struggle to compete
P2: Exploitation of lower income countries, by eg MNCs coming there
Eval: MNCs provide increased living standard through more employment and potential investment into infrastructure
P3: Cheaper prices, due to increased global competition
Eval : Shutting down of many local businesses
Globalisation/MNCS/Trade good or bad for developing countries
P1 : good
Increased employment, increase standards of living. economic growth, infrastructure, multiplier
eval : often leads to exploitation of lowest paid workers
P2: bad
Environment issues
eval: Spain and UK tomato
P3: Local industries cant compete
AOP : if its globalisation, can bring in Aid
How can macro objectives be achived without conflicting
Point 1 - conflict occurs buecause of the use of demand management policys (inflation UE trade off)
Eval - conflict depents on the level of spare capacity (where they are in the economic cycle) (if negative output gap then no trade off with increseing AD)
Point 2 - conflict can be avoided by using SSPs
Eval - SSPs can take a long time to have an effect and will not be effective in dealing with the contry comming out of a recession.
AOPs - SSPs cause unemployment (SR)
- Current account
- Problems of SSPs (high costs)
How can the macro objectives conflict
Inflation and unemployment (long run Phillips curve or Keynesian as diagram)
Eval - spare capacity in the economy (AS diagram)
P2- Growth and incresed income inequality (SSPs)
Eval - Decreased levels of absolute poverty
- growth and envoronment
Eval - is a secondary objective, and peoples well being may be prioritised in the SR
Protectionism good or bad
P1 - protect sunrise industries
Eval- companist X ineficent as they are being protected and therefore have lower competiton
P2 - incresed prices for consumers and firms (lowering consumres living standards) costs of producers increases costs of production leading to cost push inflation.
Eval - elasticity and so firms may absorbe more costs not leading to incresed inflation
AOPs- retaliation from other contries
-
How to solve current account deficit
P1 : SSPs
eval : time lag
P2 : Deprication/Devaluation
Eval : Marshal-Learner Condition
P3 : Deflation
Eval : Can conflict with other objectives, depending on inflation rate, can also cause unemployment.
Best policy for intervention: supply side, monetary, fiscal
P1 : monetary, this is the best policy for intervention as it is a market based solution, that help with demand management in the economy, through contractionary or expansionary monetary policy.
Eval - can have a large time lag (needs to look 2 years into the future)
P2: Fiscal policy, the government can rase taxes to invest into the provision of state services or reducing inequality this can benifit society as it makes it more equal, and is guaranteed to have an impact.
Eval - can disincentivise workers, and reduce the level of growth in the economy (laffer curve)
P3 : supply side policies - these can be used to increase the productive potential of the economy and increase the level of growth
Eval - unintended consequences (e.g. deregulation, caused financial markets to crash etc)
Benefits and costs of joining currency union
P1 : stability of currency for business planning, can also lead to inward investment. Reduced transaction costs for businesses
eval : no scope for depreciation to encourage exports
**P2 **: No use of monetary policy.
eval :
Good or bad of budget surplus
Intro : Structural or cyclical deficit
P1 : Reduction of national debt, therefore reducing burden on future generations. as potential improvements in credit rating aswell in future
Eval :
P2 : effects of potential increased taxes on consumption and investment
Eval : Might just be automatically achieved with economics growth (automatic stabilisers)
P3 :
How to increase development in LICs
National debt good or bad (Ive done recession as in 2022 we were in one so its most likely context of the question)
p1
-Good in a recessionary period as it promotes government spending. A government is going to naturally go into debt during recessionary periods as lowering tax revenue while a simultaneous increase in government spending on benefits needed. Government spending as a fiscal stimulus is necessary to promote economic recovery. By borrowing then spending the government is injecting into the circular flow of income. This will increase consumption in the economy increases AD helping to recovery from recessionary period. This is known as the stimulus effect.
Eval
The effectiveness can be limited if the economy is already at full capacity. In such cases, increased demand might lead to inflation rather than increased output.
P2
Bad as it can actually stunt economic growth. The government is likely to have to raise interest rates to incentivise the private sector to buy up government debt. This will lead to the crowding out effect where the private sectors MPI is higher as they have a greater return on investment due to the raised interest rates. This will lead to a decrease in Private sect investment in the economy potentially leading to a fall in economic growth.
Eval- crowding in
This depends on what the government spending is being used in. If government spending is used to fuel Public Investment,Spending on infrastructure, education, and research can enhance the economy’s productive capacity. Improved infrastructure reduces costs for businesses, better education leads to a more skilled workforce, and research can drive innovation.
