L1 - Introduction to Macro

Question 1

What did Marshall explain Economics as?

Answer 1

“The study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well-being.”

Question 2

What are the Instruments used in Macroeconomics?

Answer 2

• Bank rate (MPC)
• Govt. spending (Each fiscal year, political/economic reasons)
• Tax Rates (VAT/Corporation Tax/ Direct Tax)
• Legal controls & restrictions (e.g. 1960 income policies)

Question 3

What are the main targets?

Answer 3

• Economic Growth
• Unemployment (Keynes)
• Income Distribution (Could cause unrest, the UK is 2nd most unequal distribution in western world)
• Inflation
• BOP (Don’t be in deficit too long)

Question 4

What are the debates in Macroeconomics?

Answer 4

Firstly, depends on the models (Intervention being the main topic. When? How?Why?)

Question 5

What is the Keynesian view on intervention?

Answer 5

Intervention is essential as in aggregate private sector actions are inherently unstable and market failure is widespread –

problems which can only be resolved by active fiscal and monetary policies

Question 6

What is the Neo-Classical view on Intervention?

Answer 6

Intervention is unnecessary because markets work (or can be helped to work by minimalist government legislation)