LS21 - Macro Policies in a Global Context

Question 1

Austerity

Answer 1

Policy aimed to reduce a govt budget deficit through increases in govt revenues - tax rises, reducing govt spending

Question 2

Macro effects of austerity measures

Answer 2

Raising taxes -> lowered consumer spending -> lower investment -> so fall in AD and fall in econ growth
Also increases level of spare capacity

Question 3

Firms improving international competitiveness

Answer 3

Investing in new capital - raising productivity. Improve design and quality of their products through R&D to improve demand

Question 4

Govt improving international competitiveness

Answer 4

• improving geographical mobility
• macroeconomic stability - low and stable inflation, sound public finance, stable exc rate, econ growth
• public sector reform to reduce red tape
• improving infrastructure
• privatisation
• encourage immigration
• promote competiton policy
• incentives for investment such as tax breaks if companies use profits gor investment