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A-Level Economics Chains Of Analysis With A Droplet Of Evaluation > Macroeconomic Key Points > Flashcards

Macroeconomic Key Points Flashcards

1
Q

Interest rates effect through credit

A

More demand for credit
More consumption
Lower MPS Higher MPC
D outwards shift
P and Q (inelastic or elastic)
Inflation
Movement towards FE

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2
Q

Interest rates effect through BoP

A

Less FDI
HM outflows, capital flight
Decrease D for £
Depreciation
Better trade balance
Dearer M
Movement towards current account surplus

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3
Q

Interest rates effect through budgetary position

A

Base rate increase
CR increase
assumption same mag and dir
balance budget sheets of B

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4
Q

Interest rates effect through wage

A

increased confidence/animal spirits
anticipate inflation
wage up, prices up, cost push
wage price spiral due

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5
Q

Interest rates effect through supply

A

stimulate investment into prod. capital
increased confi
shift in ad and ;ras
therefore growth and emp, p the same
macro objectives

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6
Q

Evaluation of IR:

A

Forward guidance transparency (timing)
magnitude of change (stability)
economy stage
confidence
time lag
passing on - £23bn big 4 banks

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7
Q

Types of budgetary position

A

Structural and Cyclical

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8
Q

structural is when

A

gs =/ taxation
hard to eliminate
discretionary fp

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9
Q

discretionary fp

A

active change to gs and t%
school funding
LR

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10
Q

Cyclical is when

A

economic cycle
automatic stabilisers help

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11
Q

automatic stabilisers

A

increase gs for SR
benefits
decrease tax rate

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12
Q

Ricardian equivalence

A

cut tax rate in SR
national debt increases as ind. anticipate tax rise going forward
negates effects of EFP

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13
Q

Inflation pros

A

nominal wage increase
econ growth

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14
Q

Inflation cons

A

possible recession
falling savings value
squeeze on public sector costs

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15
Q

Inflation effect on gini coeffient

A

erodes value of savings
savers hurt, borrowers gain
poor higher % income on subsistence
VV
REGRESSIVE

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16
Q

eval: inflation on gini

A

high no. of indebted are poor
inflation erodes value of debt
rich likely to save
potential for limiting regression
Arbitrary redistribution

17
Q

interventionist SSP

A

R+D and training (human capital)
Infrastructure
Subsidies
Healthcare

boost LRAS

18
Q

laffer curve drawbacks

A

theoretical model
impossible to know where you are

19
Q

laffer curve chain

A

increase TR till a point
m=o then decrease:
disincentives to work
tax evas/avoid
emigration
higher skilled, make up TR a lot

20
Q

achieve all 4 macro obj

A

growth unemployment - interest rates low therefore inflation cost push may erode currency

srpc unemployment and inflation - lrpc

21
Q

drawbacks of SRPC

A

does not show LR
monetarists adapted to show LR in LRPC

22
Q

SRPC Chain

A

conflict between infl. and unemployment
trad AD shift
movement along SRPC
inverse
demand pull infl

23
Q

stagflation

A

shift in SRPC inwards

24
Q

LRPC point

A

NARIU AND NRU

25
Q

COVID monetary policy

A

interest rates 0.75% to 0.1% no effect so QE (495 bn)
growth, decresed U, prevented deflation

26
Q

covid mon lead to

A

high inflation 11.1%
banks uncertain not willing to lend
constricted growth for a while

27
Q

present day monetary policy

A

IR 0.1 to 5.25
quantative tightening to decrease inf

28
Q

cons of monetary

A

bank failure (silicone valley, credit suisse) insolvency
decreased growth and increase U
decreased investment

29
Q

combat economic inactivity

A

interventionist ssp
lower benefits and consumer taxes

30
Q

decrease NRU

A

Infra and edu
combat hysteresis

31
Q

regional growth

A

interventionist
corp tax and subs

32
Q

productivity

A

labour market reform (min wage relax immigration)
cut corp
interventionist

33
Q

deflation chain

A

deflation suggests inwards shift in AD
falling confidence
Falling prices, falling GDP
higher savings ratio, MPS up
rev businesses fall
cyclical unemployment
unemployment and growth conflict with obj

34
Q

deflation chain eval

A

Benign deflation good (supply shift)
deflation could be caused by increase in aggregate supply, perhaps due to infrastructure improvements

35
Q

eval of inflation

A

Depends on the nature of inflation → if your in a recession increasing inflation builds growth
This could lead increase in AD
higher spending signals to increase output, reduction in unemployment

36
Q

crowding out

A

government needs to borrow for GS
increased psncr adding to net debt (GS>T amount)
sell bonds to fund x, savings
Outwards D for LF
PS borrow less (highr IR)
Less productive capital -> less growth
classical idea, against GS

37
Q

crowdin out eval

A

Q LF is not limited, drastic change in IR unlikely
external finance available
Keynesians temp GS increase multiplier effect if the economy is under-utilised (capacity)
Extra T rex and employment

A-Level Economics Chains Of Analysis With A Droplet Of Evaluation (3 decks)

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