MEPO FLASH DID WELL

Question 1

What happens to wages when there is a shortage in the labour supply?

Answer 1

Cause wages to increase (wage pressures build up)

Question 2

When there is a labour shortage wages increase, what is the net effect of this on the wider economy?

Answer 2

• As wages go up people start spending more.
- The cost of production increases because labour is a major production cost.
- Inflation occurs

Question 3

What does Low Unemployment or Reduced Spare Capacity lead to?

Answer 3

Higher inflation

Question 4

How is the trade-off between unemployment and inflation measured?

Answer 4

By the rate of change in wages.

Question 5

If the government tries to exploit the trade-off between unemployment and inflation will it work?

Answer 5

Unlikely to, if the government tries to spend its way into reducing unemployment the most likely effect will be inflation to absorb the governments extra spending.

Question 6

Because Increased wages is linked to inflation, what will the effect of this be on employees and firms?

Answer 6

• Workers’ wages are being eroded by inflation 
- Firms will not be getting as much profit out of their workers because of inflation.

Question 7

Is an increase in employment likely to last in the long term?

Answer 7

No, because increase in employment will lead to higher wages, which leads to inflation, workers real wages then decrease and firms worker productivity/ profit per worker decreases so they make workers redundant

Question 8

Does economic growth worsen the balance of payments current account?

Answer 8

Yes

Question 9

Why does economic growth worsen the balance of payments current account?

Answer 9

• Economic Growth causes incomes to rise


- consumers are likely to then demand more imports


- Firms incentives to export diminish as it is easier to find customers in the domestic market

Question 10

What are the only exceptions for economic growth worsening the balance of payments current account?

Answer 10

• Export-led Growth
- if the growth is caused by an increases in AS

Question 11

How do increased employment and sustainability conflict?

Answer 11

• If more workers are employed, there is likely to be more congestion on the roads


- Greater carbon & energy usage because of greater manufacturing.
- Additionally worker wages are likely to increase.


- Workers Are then more likely to go abroad which increases carbon emissions

Question 12

Why may Increased Employment and Sustainability NOT conflict?

Answer 12

• Government has a greater scope for taxation, and may implement a green tax, were taxation is specifically used to reduce carbon use.


- Also wether the higher employment is in the service sector because more people work remotely, and can have a negligible affect on the environment

Question 13

Why do Economic Growth in Inequality Conflict?

Answer 13

• Economic Growth causes incomes to rise for those at the top end of the income spectrum


- Causing a widening income inequality