Paper 3 Flashcards
Micro causes of income inequality
- education
- age
- capital intesnvie production
- tech
- flexible labour contracts
- inheritance
Macro causes of income inequality
- one sector dominance
- recession; younger/low skill workers laid off quicker
- globalisation; intl trade, countries loses comp advant
- FDI: low wages driven down by influx of low skilled immigrants, FDI, competition from trade (lose comp advant or cut costs by lowering wage or firing)
- corrupt governmet policies
Micro consequences of income inequality
- social cost; negative externality to taxpayer
- incentive to be educated
- incentive for entrepeneurship; take risks to get lots of profit so v high income
- incentive to work to increase income
Macro consequences of income inequality
- gov finances; spending on benefits, less tax
- living standards
- asset bubbles (rich invest income, market crash?) and indebtedness (poor have to borrow); both of these lead to financial sector instability
- growth; growth is limited due to limited spedning pwoer of those with highest MPC
MICRO policies to fix income inequality
max/min wage
macro policies to resolve income inequality
- progressive income tax
- g spend on welfare transfer payment
- g spend on education/health
- universal basic income
micro effects of expansionary moentary policy
- impact on savers; erodes savings, ls fall as unemployed, people savign for house, pensioners rely on savings
- house prices; positive wealth effect
- firms costs and profitability; costs fall if on variable loans
- impact on indebted households; monthly repayments of variable loans for, dispo income rises, LS rise
macro effects of expansionary monetary policy
- growth
- unemployment
- inflation
- trade/CA position
micro effetcs of weak exchange rate
- high debt servicing costs; real value of debt falls
- high prices
- high costs of production
- productive/ x inefficiency; exporters can afford to let prices rises abit bc imported competition is weak
macor effects of weak exchange rates
- intl competitiveness
- increased exports, fall imports, CAD improves
- imported inflation; cost push
- greater FDI; lower startup costs an cheaper exports attract fdi
- EXPORT LED GROWTH sand unemployment
Micro effects of protectionism
- higher prices
- lower quality
- producer revenue
- consumer DWL/producer surplus
- allocative inefficiency DWL
macro effects of tariffs
gov revenue; FUND GOV SPEND; RESOLVE BUDGET DEFICIT
inflation; imported inflation
- CABOP;
- growth; net exports rise assuming export rev stays same, AD increase, growth rise
- employment; protects domestic firms so domestic employment protected
micro effects of NMW
- income ineqlaity reduced and equity improves
- higher prices. lower consumer surplus (wage price spiral)
- producer revenue/profit
- individual impact of job losses
macro effects
- unemployment
- inflation
- competitiveness/trade balance
- government finances
macro effects of unemployment
- lost output
- government finances
- hysterersis
- inflation
- current account
micro effects of unemployment
- social costs, pressure on public sector services
- pool of workers for firms
- individual costs
- worsening of market failure; drugs alcohol
market based development micro effects
- allocative efficiency
- dynamic efficiency
- market failures
market based development policies macro effects
- jobs
- tax revenue
- income inequality
- growth/income/living standard/poverty`
micro effects of nationalisation
- allocative efficiency, solve market failure
- lower prices, higher quality and choice
- greater economics of scale
- skills training and productivity
macro effects of nationalisation
- government finances
- employment
- inefficiency and inflation
- dynamic efficiency - LRAS
macro effects of free trade
- current account deficit potentially
- AD, growth, unemployment
- inflation
- living standards & poverty
- dynamic efficiency and LRAS
micro effects of free trade
- lower prices, consumer surplus
- quantity/choice
- competition and static efficeincy
- tech and costs of production
- economies of scale
macro effects of supply side policies
- growth
- unemployment
- inflation
- current accoutn gov finances
micro effects of supply side policies
- productivity
- stakeholder garm of market based SSPs e,g equity, labour markets
- competitioj benefits; efficiency
- risk of monopoly power
- solve market failures
macro effect of growth
all macro objectives
- and incomes, LS, poverty
micro effects of growth
- market failure - eniviro
- income inequality
- profit, DE
macro effects of FDI
- growth, unemployment, incomes, LS and poverty
- inflation
- BOP
- tech diffusion and LRAS
- gov finances
micro effect of FDI
- welafre of workers and pay
- market failures - enviro
- DE - costs, productivitu
- competition
micro reasons for protectionism
- protect workers
- protect against dumping
- protect standards
macro reasons for protectionism
- CAD
- gov revenue from tariff
- protect against unemployment
- infant industries and diversification
micro causes of CAD
- low productivity
- high relative min wage
- strong trade unions
- resource depletion
macro causes of current account deficit
- high growth at home
- low growth abroad
- strong exchange rate
- high relative inflation
- poor investment
- loss of comparative advantage
micro barriers to development
- low productivity
- poor ed, health, infrastructure
- volatile commodity prices
- resource depletion
- power of MNCs
micro influences on intl competitiveness
- productivity - ULC
- regulations
- labour market flexibility
- competition
- subsidies
- investment, r&d,
macro influences of intl competitiveness
- tax rates
- relative inflation
- exchange rates
- infrastructure
- gov finances
- protectionism
micro effcts of fiscal policy
- crowding out (less or more dep on which fiscal policy)
- solve MF
- public services impact
- x inefficiency; opp costs of g spend
- profits for firms; tax cuts
^both xpans and contract
contract only: inequality from increasing regressive tax and cutting g spend
macro effects of fiscal policy
expansionary: growth, unemployment, inflations, trade, CA position, gov finances
contractionary: gov finances (confidence and fiscal headroom both improves). inflation, trade, growth unemployment, productive capacity constraints LRAS shifts left
micro effcts of market structures
- in terms of all 4 efficiencies
- anti comp strategies
- price discimination
macro effects of market structures
- de and LRAS
- jobs
- prod efficiency and LRAS
- competitive markets and poverty alleviation as affordability improves and LS improves
micro effects of subsidy
- price and CS
- quality and market failure
- affordability and equity
- producer rev and efficiency
- cost to gov
macro effects of subsidy
- protect domestic producers and workers
- inflation
- intl comp
- trade and current accoutn
- gov finances
- FDI
micro effcts of privatisation
- all efficiencies
- stakeholdr impacts
- market failures; e.g cost cutting. ignoring externalities
macro effects od privatisation and deregulation
- PE AND DE - link to boosting lras
- competitive employment or cost cutting leading to unemployment
- infrastructure building; comp and FDI
- gov rev by selling of state own assets
