evaluate Flashcards
evaluate the benefits and costs of a oligopoly
costs
- high concentration means little choice
- could lead to higher prices and reduced output
- allocative and productively inefficient
advantages
- can have a highly competitive pricing strategy
- supernormal profits can be used for innovation
- price stability
evaluate efficiency in perfectly competitive
allocative efficiency
producer and consumer surplus is maximised
productively efficient
homogeneous goods - little scope for innovation
no incentive to develop new technologies
evaluate the extent to which contestability is desirable
- more choice
- lower price
- unnecessary waste through differentiation
- allocatively inefficient
evaluate the effects of privatisation
- improved efficiency
- increase competition
- source of government revenue
- could just privatise a natural monopoly
- doesnt maximise social welfare
- government still need to regulate it
depends on the industry
depends on the quality of regulators
evaluate the benefits and problems of economic growth
- higher average income
- increase compeititon
- lower unemployment
- increase tandard of living
-encourage investment
(depends how evenly the growth is distributed and who benefits )
-problems - increase inflation
increase inequality - deterioration on the current account
- increase pollution and negative externalities - can be minimised through better technology
evaluate the quantity theory of money
- monetarist believe that in the short term velocity is fixed
- increase in money supply takes 9-12 months to have an impact
- increase in price may be due to speculation of a price rise
evaluate the consequences of a current account deficit
problems lower confidence unemployment cause a depreciation - may make it more competitive uncompetitiveness
may increase standard of living
depends on the size of the deficit to GDP
depends how you are financing the deficit
depends on the country - eg US are not concerned due to the level of capital flows to buy dollar securities
evaluate the possible approaches in dealing with a current account deficit
policies
devaluation - marshall learner
expenditure switiching
expenditure reducing
evaluation
depends on the elasticity because if demand is inelastic devalutation will make the deficit worse
devlaution can lead to cost push inflation
increasing interest rates - will just encourage hot money flows appreciating currency - not helping
fiscal policy - may lower economic growth and cause unemployment
protectionism may lead to retaliation
evaluate whether concerns about public debt is reasonable
dependant on how it is financed
inflationary pressures - if government print more money
may be funded through supply side improvements
keynes argued that borrowing is beneficial creating a stimular to end recession - growing deficit in full employment is more concerning
depends on the level of government debt. if bond yields are low and borrowing low a government can finance its debt by tax revenue
evaluate the use of demand side fiscal policy in terms of effectiveness on public sector debt
lower tax and increase government spending
depends on size of the multiplier - if the multiplier is large then it will have a bigger impact on demand
depends on state of the economy - fiscal is effective in recession
depends on other factors in the economy
evaluate the impact of a change in interest rates
higher
- increase borrowing costs
- increase incentive to save
- increase value of currency
- reduce ad
- lower growth
- high unemployment
lower
- consumption higher
- cheaper borrowing costs
evaluation
- will lower interest rates will be passed on to consumers
- banks may be unwilling to lend
- time lags - take 18 months to have an impact
- depends on confidence
evaluate the risks of qe
- causes inflation
-leads to banks lending at lower rates - increased borrowing
-encourages growth
evaluation - lead to unexpected rise in commodity prices
- devalue currency
