Solutions To Macroeconomic Policies

Question 1

Unemployment - fiscal (2)

Answer 1

Reduce tax:
encourages unemployed to renter workforce
Increases income = AD increases and firms hire more

Question 2

Unemployment fiscal problem (3)

Answer 2

Less tax rev
Rich get richer = inequality increases
Inflationary pressure

Question 3

Unemployment monetary policy - what

Answer 3

Inter rate reduced = increased Y = increased AD

Question 4

Unemployment monetary problem (3+)

Answer 4

Demand pull inflation
Borrow more than can pay back
Demand for British pound falls = WPIDEC = increased output and domestic unemployment

Question 5

Unemployment supply side policy - what (2)

Answer 5

Subsidise training scheme
Improve skills

Question 6

Unemployment supply side - problem (3)

Answer 6

Expensive
LRAS
opportunity cost

Question 7

Economic growth - fiscal what (2+)

Answer 7

Reduce tax = increase AD
firms increase output / EG and employment

Question 8

EG - fiscal problems (2)

Answer 8

Reduce tax rev
Demand pull inflation

Question 9

EG monetary what

Answer 9

Reduce IR = increase income and AD = EG

Question 10

EG monetary problems

Answer 10

Demand pull inflation

Question 11

EG supply side policy - what + example (2+)

Answer 11

Subsidy so firms can hire more workers = increase Y and AD
Example = CAP + green energy is heavily subsidised

Question 12

EG supply side problem (3)

Answer 12

Expensive
Long term
Opportunity cost

Question 13

Inflation - fiscal policy what (3)

Answer 13

Gov increase income tax = reduced Y and AD = removes inflationary pressure

Question 14

Inflation fiscal problems (3++)

Answer 14

Unemployment increases = forms want to max profit
EG reduces = recession = negative multiplier effect
Poverty + inequality

Question 15

Inflation monetary policy (3)

Answer 15

Increase IR = more expensive to borrow = reduced income and AD

Question 16

Inflation monetary problem (3+)

Answer 16

Unemployment = firms want to max profits
Hot money flows = SPICED = increased FDI = deficit in BoP

Question 17

Inflation supply side policy what (2)

Answer 17

Subside uk firms = cost of production reduces
Encourages increased output = price reduced

Question 18

Inflation problem supply side (3)

Answer 18

Opportunity cost
Expensive
Who gets subsidy? = people get annoyed if they don’t