Unit 2 - 3

Question 1

What fiscal measures would be used in order to decrease demand?

Answer 1

USED TO REDUCE INFLATION

1. Decrease government spending - less money put into the economy, negative multiplier effect, people’s incomes will decrease meaning they will spend less
2. Increasing taxes - people will have less disposable income as more income is taken in tax, people will also buy less if VAT is increased

Question 2

What fiscal measures would be used in order to increase demand?

Answer 2

DURING A RECESSION

1. Increase government spending - more money in the economy, multiplier effect and then people’s incomes therefore will rise
2. Decreasing taxation - people will have more disposable income and therefore will spend more, also if VAT is lower

Question 3

What monetary measures would be used to increase and the money supply and therefore demand?

Answer 3

1. Lowering interest rates - people will save less and they will not get a great return, more inclined to borrow meaning more money to spend in the economy. The interest on mortgages will also decrease meaning that people with mortgages will have more money to spend and therefore will spend it in the economy. Businesses will also borrow more money to invest in new equipment etc

Question 4

What monetary measures would be used in order to decrease the money supply and therefore decrease demand?

Answer 4

USED TO REDUCE THE RATE OF INFLATION
1. Increasing interest rates - people will me more likely to save their money as they will get a greater return, people less like to borrow as expensive therefore people will have less money to spend. Mortgages will also be very expensive meaning that people will have less money to spend. Businesses won’t borrow

Question 5

What is Economic Growth?

Answer 5

1. Usually measured in real GDP per capita

2. An increase in the productive capacity of an organisation

Question 6

What are the benefits of Economic Growth?

Answer 6

1. Increase in the standards of living = economic growth which then means increased output and therefore there are more goods and services for people to enjoy
2. Increased tax revenue - government can therefore either decrease the tax rate or increase government spending
3. Decreased unemployment as EG leads to greater output which means the more workers are required, and therefore there will be decreased benefits paid and therefore increased tax revenue for the government

Question 7

What are the problems with economic growth?

Answer 7

1. As EG increases - so does technical progress which can often mean that workers will be replaced by machinery = unemployment
2. Increased healthy problems as there is an increase in the number of hours people will work therefore leading to stress which may lead to increased health issues and therefore increased burden on the NHS
3. Pollution
4. Scarce resources will be used up quicker as more output is produced = reduced resources
5. Demand will increase, therefore meaning that prices will increase, this will cause inflation
6. Unequal distribution, not everyone can afford the extra output produced, meaning that the rich will gain and the poor may suffer or gain just little

Question 8

What are the costs of Economic Growth?

Answer 8

BY USING FACTORS OF PRODUCTION MORE EFFICIENTLY

1. LAND - investment in irrigation, fertilisers and drainage, improving transfer infrastructure
2. LABOUR - increasing the number of workers will increase the output but only by a certain extent if the country has adequate supplies of land and capital to keep the extra workers fully employed
3. CAPITAL
4. MOBILITY - the willingness and ability to move economic resources from declining industries
5. TECHNICAL KNOWLEDGE - inventions, development of new materials, performance of machinery

Question 9

What is sustainable development?

Answer 9

Achieving growth now without destroying the future of the planet
Creates an increase in the standards of living now and does not jeopardise future standards of living

Question 10

How do you achieve sustainable development?

Answer 10

1. Worldwide agreements to reduce CO2 emissions and the presence of greenhouse gases
2. Budget measures - pollution tax, petrol tax, landfill taxes, taxing large cars
3. Recycling rubbish

Question 11

What is unemployment?

Answer 11

All those who are willing, available and able to work at the going wage rate in any suitable job but cannot find full employment

Question 12

What is full employment?

Answer 12

1. One of the governments key aims - a macroeconomic objective
2. The highest possible employment at any given time

Question 13

What is the rate of unemployment?

Answer 13

The level of people unemployed as a percentage

Question 14

Why is youth unemployment a worry for the impact on youths?

Answer 14

1. They may move back in with their parents
2. They may get depressed - may lead to suicide
3. They may have low self esteem
4. They may have a lack of skills

Question 15

How would youth unemployment be solved?

Answer 15

1. Increase the quality of education

2. Increasing demand for businesses will increase their employment of workers

Question 16

What is the Claimant Count?

Answer 16

1. Shows the number of people who are out of work and are claiming JSA
2. Calculated monthly

Question 17

What are the problems with using the claimant count for measuring unemployment?

Answer 17

1. Frequent changes in how it is calculated - difficult to make comparisons
2. Some work for cash and then claim fraud
3. Some may be seeking work but claim benefits as - they have high levels of savings, believe there is a stigma attached to claiming benefit, or they are no aware that they can claim

Question 18

What is the labour force survey?

Answer 18

1. Conducts a survey of 60,000 households
2. Calculate quarterly
3. Similar to other country’s methods which means it is easer to compare measurements
4. And individual is unemployed if - they are out of work, actively seeking work, looked for work in the past 4 weeks and are able to start work in the next 2 weeks

Question 19

What are the problems with calculating unemployment with the labour force survey?

Answer 19

1. Excludes part time workers

2. Excludes those not seeking a job but would take one if offered

Question 20

What are the causes of unemployment?

Answer 20

1. Trade unions have forced wages up to high meaning that firms cannot afford to take on as many workers as they would if wages were lower
2. Government - minimum wage too low, unemployment benefits too high, tax levels too high = disincentives to work
3. Lack of spending and increased saving
4. Interest rates rising
5. Exports decreasing and imports increasing

Question 21

What are the types of unemployment?

Answer 21

1. Cyclical - relates to trade cycle
2. Seasonal - due to time of year
3. Technological - new tech replacing labour
4. Structural - changes in the industry
5. Regional - industry declining
6. Frictional - people leaving education or moving between jobs

Question 22

What are the costs of unemployment to an individual?

Answer 22

1. Decreased standards of living
2. Decreased efficiency - lose skills, fitness and motivation
3. increased health problems
4. Increased divorce rates
5. Low self esteem

Question 23

What are the costs of unemployment to the local community?

Answer 23

1. Increased crime rates
2. Civil unrest - strikes
3. Negative multiplier effect

Question 24

What are supply-side policies?

Answer 24

1. Policies that aim to increase supply by altering or improving the factors of production
2. Labour - 1. Reduce the powers of trade unions as they will aim to increase wages which will mean that organisation won’t be able to employ increased people 2. Cut income tax in order to give workers the incentive to get jobs 3. Improving the mobility of labour by encouraging people to move to countries that will have more jobs available