Macro Essay Plans Exam With 100% Correct Answers 2024

Macro Essay Plans Exam With 100% Correct Answers 2024 Evaluate the view that free-market supply-side reforms are beneficial to the UK economy [25] - correct answer-Supply side policies are the set of micro and macro government policies used to improve national economic performance by creating more competitive & efficient markets. Decrease NMW & benefits (reduced real wage unemployment), reduced income so increased incentive to work, increased labour supply, decrease wage costs, increase SRAS EVAL: decreased disposable income so decreased consumption and decreased AD (although low-income individuals don't make up significant percentage of consumption). Leads to downward multiplier and increasing income inequality. Additionally, workers may move abroad in LR so decrease labour supply and decrease LRAS Decrease income & corporation tax C: increased incentive for firms to expand & increased enterprise, also thru invention & innovation so increase SRAS, dynamic efficiency. As a result, increased profit so increased capital investment e.g. specialist machinery and tools so increased productivity and increase LRAS. EVAL: might not reinvest profits I: increased disposable income and increased incentive to work as individuals get to keep more of what they own. Increased labour supply, reduced wage costs, increase SRAS. EVAL: keep more of income so possibility that target income reached so reduced labour supply and reduce SRAS DIAGRAM - upward sloping & backward bending labour supply curve EVAL for both C & I: opportunity cost of reducing taxes is lower gov revenue so reduced infrastructure spending Deregulation & privatisation D: decreased costs to enter market so reduced barriers to entry so increased SRAS P: firms profit maximise so cut costs to increase efficiency and increase SRAS - more intl competitive EVAL: Explain how demand-side and supply-side shocks might harm a country's economic growth [9] - correct answer-SS - sudden increase in price of oil Raises cost of production & reduces SRAS, while simultaneously reducing output and causing inflation DS - tightening of monetary/fiscal policy Increase tax and reduce gov spending/ increase interest rates, overall reduce consumption so reduced AD and economic growth Evaluate whether a reduction in unemployment is best achieved through supply-side or demand-side policies [25] - correct answer-Depends on type of unemployment - DS/SS Demand deficient Use expansionary monetary/fiscal policy to stimulate AD so that the derived demand for labour increases, enabling the output gap to be closed as space capacity is reduced. EVAL: lack of information on size of output gap and size of multiplier - hard for gov to determine size of stimulus needed EVAL: monetary & fiscal policy suffer from time lags, possibility that gov overstimulates the economy causing inflation Frictional Reduce JSA - search time between jobs reduced as workers need to obtain income quicker EVAL: if unemployed are financially worse off they may not be able to search for work properly e.g. unable to afford travel to interviews or phone employers Reduce direct taxes - increases post-tax wage so encourages unemployed ppl to find work EVAL: insufficient, changes to benefits system also need to be made to eliminate unemployment trap Improve job information - e.g. Job Centre Plus programme Structural Regional policy - gov gives grants and tax breaks to firms that relocate to areas of high structural unemployment EVAL: doesn't solve occupational immobility, so requires extra retraining schemes Improve geographical immobility - gov gives grants / low-cost housing to encourage workers to move to regions where there are jobs EVAL: family & social ties Leave to market - high unemployment drives down wages, new firms attracted to regions to take advantage of low costs of production Evaluate government policies for tackling deflation [25] - correct answer-Expansionary monetary policy Aims to increase AD by manipulating interest rates. Decreased savings rates & lower credit rates (increased borrowing) - increased C Decreased rates on business loads - increased I DIAGRAM - LRAS w/ increasing AD EVAL: investment increases LRAS so PL down again Expansionary fiscal policy Reduction in income tax - consumers have more disposable income, increase in government spending