Question 1:
a) Use Figure one to explain the decrease in the savings Ratio (8)
-Interests rate fall
-House price increase/consumer confidence
b) Economic effects of rising house prices (12)
-Increase spending
-Increase confidence
-Mortgage equity withdrawal increase
-Growth
-Fall in unemployment
-Inflation rise
c) Explain monetary policy (4)
-Manipulation of r to control inflation
-MPC independant
-Transparency
-Named target 2% ± 1%
d) What do the MPC take into account when making interest rate decisions (8)
-Level of consumer spending/growth
-Exchange rate level
e)Budget deficit effects on circular flow
-Injection, government spending
-Multiplier effect
-Value of goods and services increase
-Growth
-Fall un unemployment
f) Benefits of Low inflation (12)
-Increased certainty, reduced uncertainty means investment increases as too does consumer S
-Increased competitivity of Uk goods
g) Demand side polices causing conflicting macro objectives (30)
-Role of Fiscal policy for growth = G>T
-Role of monetary policy to control inflation = Increase r
-Economic growth vs Inflation
-Inflation vs unemployment
-Employment vs unemployment
-Increase equality vs Decreased equality
POINTS EXCLUDE EVALUATION.