LS21 - Macroeconomic Policies in a Global Context

Question 1

Austerity

Answer 1

• economic policy aimed at reducing a government’s budget deficit through increases in government revenues - via tax rises - and/or a reduction in government spending or future commitments

Question 2

Measures to reduce poverty and inequality

Answer 2

• benefits
• progressive taxation
• national minimum wage
• social housing
• supporting children from low income households

Question 3

Measures to increase international competitiveness

Answer 3

• increase occupational mobility through education and training
• maintain macroeconomic stability (inflation, GDP growth, exchange rate)
• public sector reforms to reduce red tape
• government expenditure on infrastructure
• privatisation
• encourage immigration
• promote competitiveness through competition policy
• incentives for investment e.g. tax breaks

Question 4

External/Exogenous shock

Answer 4

• an unexpected event beyond the control of the country’s officials that has a large negative impact on its economy

Question 5

TNCs economic benefits

Answer 5

• for LEDCs they help overcome savings gap as they provide an external source of capital and increase employment
• for MEDCs they provide an opportunity to diversify the economy and reduce unemployment

Question 6

TNCs economic costs

Answer 6

• tax avoidance
• TNCs operate global supply chains allowing them to split up production process in most cost efficient manner

Question 7

Transfer pricing

Answer 7

• an accounting practise that represents the price that one division in a company charges another division for goods and services

Question 8

Problems facing policymakers

Answer 8

• inaccurate information
• risks and uncertainty e.g. QE’s full implications are somewhat unknown
• external shocks