review sractiom A

Question 1

With reference to the chart on the previous page explain the likely impact of an increase in average house prices on UK consumption?

Answer 1

Reference to wealth effect
Increase in YK consumption
Increase consumer confidence

Question 2

Automatic stabilisers definition

Answer 2

Automatic stabilisers means government spending vary without direct government descuon making over the course of the economic cycle

Question 3

Discretionary fiscal policy

Answer 3

Direct alteration of govemrnet expidture or tax designed to achieve its economic objectives

Question 4

In may 2020 the uk government introduced a loan scheme to help small business survive the downturn in the economy. Small business could borrow up to 50 thousand pounds at an interest rate of 2.5% for up to 6 years from a bank. The givermnet guaranteed 100 percent of the loans to enable banks yo issue them quickly and only minimal checks were made on borrowers?
Explain one role of finical nmakrets with reference to the above text ?

Answer 4

To lend to bussinesss and individuals to help them consume/invest
Many small business required loan to help them survive this loans allowed for firms to grow quicker
Business will already have accounts with banks so the banks were in a position to quickly issue these loans to their customers

Question 5

ILO measure of unemployment

Answer 5

The ILO measure of unemployment uses the labour force survey to see someone as unemployed if they are without a job want a job and have actively sough work in the last four weeks

Question 6

Claimant count unemployment

Answer 6

Is the total number of people claiming jobseekers allowance

Question 7

Why is the ILO higher than the Clamiant count

Answer 7

Because they are measure in different ways
Some unemployed people are not eligible to claim JSA
Some unemployed people do not wish to collect JSA or new unaware of their right to claim

Question 8

Exaoliun the likely effect of an increase in US income tax rates on the US trade balance ?

Answer 8

Trade balance is the value of exports minus the value of imports - a rise in income tax disposable incomes in the us would fall therefore demand for imports would fall and the trade balance would improve

Question 9

Explain one role of finical markets?

Answer 9

To mobilise savings for lending to business and indiuvuals to invest or consume

To facilitate the exchange of goods and services by providing a flat currency

To provide a market for equities to facilitate rising of finances by business

Question 10

Exaolin one reason why the UK central bank used quanituatuve easing following the Global finical crisis of 2008?

Answer 10

To stimulate growth by increasing money supply

To increase bank liquidity so they would be more willing to lend

Interest rates were already very low so limited scope for further reductions

Prevent deflation by increase in money supply

Question 11

Explain what is meant by rogue lewis model ?

Answer 11

Lewis model suggests that countries dependent on agriculture would see productivity gains and growth of they moved to indrustrialiation
Unproductive agriculture moves to more productive and profitable manufacturing
Farming has a very low marginal productivity

Question 12

What is an absolute advantage?

Answer 12

It is when one country can produce more of a good at a lower cost of production than another

Question 13

Explain the likely effect of a decrease in average weekly real earning on the equilibrium level of real national output in the uk. Include an aggregate demand and aggregate supply diagram in your answer

Answer 13

A decrease in real incomes will lead to a decrease in consumption leading to a fall in aggregate demand

Question 14

Explain the likely effects of a decrease in unemployment on portals budget defector

Answer 14

A budget deficit is when government spending is greater than government tax revenue
A fall in unemployment rate implies a fall in Portugals budget deficit
Increased government tax revue from uncimne tax
Tax revenues from income tax are likely to increase because more people are in employment

Question 15

Explain the likely effect if an increase in capital expenditure by the public sector on a country’s output gaps

Answer 15

Public expenditure is expenditure by the central government or state enterprises and output gap is a ameasure of the difference between an economy’s actual output and its potential output
Capital expenditure could include expenditure on infrastructure such as roads
Increase public expenditure on capital good is an injection into the circular flow which will cause gdp to rise why a larger amount than the original injection so reducing the output gap

Question 16

Explain what may have happened to Brazil import and export prices to cause the change in terms of trade shown by the decrease in terms of trade

Answer 16

A depreciation of the Brazilian currency would cause Brazil exports to become relatively cheaper and imports relatively more expensive

Question 17

explain why the real gdp of an economy is not increasing despite it being evident that there is an increase in ad

Answer 17

The economy is already operating at full capacity so therefore in order to increase gdp further iras will need to shift

Question 18

difference between disinflation and deflation

Answer 18

Deflation – A decrease in the general price level of goods/services within an economy resulting in an increase in the purchasing power of money.

Disinflation – A decrease in the rate of inflation (the general price level is increasing, but at a slower rate than before) e.g. inflation falls from 5% to 4%

Question 19

Human Development Index

Answer 19

A measure of a country’s economic development that takes into account health (life expectancy), education (average and expected years of schooling), and standards of living (real GNI per capita).