(Original post by student1231)
One possible 30 mark question which I think may come up will be about Unemployment/Employment due to the Olympics. Can someone tell me how to answer the following two questions?
1) Discuss how a increase in Employment will effect the economy? (30)
2) Discuss how the government can achieve higher rates of employment in the economy? (30)
1) an increase in employment will close the current negative output gap the economy has, bring AD up, and a multiplier effect. disadv- BoP will worsen as more import will be demanded../..many people owe money to the banks, thus AD may not rise alot since much of people's income is going to the bank to repay money, so they have little disposable income../..although you can say that olympics may bring in alot of money into the UK from tourists, thus the higher imports demanded may be countered.
2) government can achieve higher employment rates by using demand/supply side policies. disadv- government has a fiscal deficit, more spending will worsen the debt in the long run, inflation is already 3%, higher GDP will further hurt inflation as it goes up, you achieve two macroeconomic objectives, two others get slapped in the face lol (use diagram).
Just looked at a past question and jotted some notes down on how i'd answer.
its the June 2009 Macro Paper - Question 4 of Context 1.
Extract B (lines 11-12) states: ‘When total spending grows more quickly than the
volume of output produced, inflation is the result.’
Assess the view that inflation is always caused by an increase in aggregate demand.
that is the question..
In the mark scheme it says nothing about talking about how a government would go about reducing inflation.. like using different Fisc and Mon policies
Hey guys my exams tomorrow. I have to start revising now. What do you think will come up? Some topic names i can especially focus on? I need all the help i can get... And does anyone have a list of short word definitions? I desperately require it.
(Original post by QwertyG)
How do you describe the Elasticity for the LSAS curve I do not understand
You'd evaluate by saying 'It depends where the economy lies on the LRAS curve.'
So if it's on the 'elastic' part/spare capacity (horizontal part) then an increase in AD would cause growth and not inflation. If it's on the 'inelastic' part/full employment (vertical part) then an increase in AD would only cause inflation and no growth.
Hope that makes sense.