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GeorgeAndLennie
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I'm not sure how to answer this question. I'm confused:

"How does demand-side policies conflict with the macroeconomics objectives?"

Apparently I have to talk about expansionary fiscal policy. But I have no idea what to write. How to structure etc. Could someone help please
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gr8wizard10
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(Original post by GeorgeAndLennie)
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Unsure whether or not you're doing AS or A2.

You'd be required to talk about demand-side fiscal policies (Keynesian ideology possibly), expansionary monetary policies and there affects on:

Economic Growth
Inflation
Unemployment
Balance of trade
(& possibly the budget deficit)

I don't do your exam board, although I'd structure along the lines of

-2 solid definitions explaining the relevant keywords the question is asking (backed with examples if applicable)
In this case "Demand Side policies & Macroeconomic objectives"

-An introduction to the topic at hand, show that you understand what needs to be answered.
e.g: The macroeconomic objectives in the UK are .../.../.../... and government intervention in the market can aid in both improving and worsening the macroeconomic objectives. The macroeconomic objectives can conflict with each other and a balance may need to be met whilst deciding which policies to pursue, one example is the theory discovered by William Phillip where he discovered a trade off between the rate of inflation and unemployment. This theory suggested... (any theory here would be applicable, even Keynesian theory of increasing AD where AS is inelastic)


-1st Diagram / Explanation of what's happening (from the text)
Increasing budget deficit, to help increase AD, Keynesian diagram to show inflation increase without increase in GDP (RNO)
-Analysis of first diagram, (Chain Links) words such as 'therefore, in hindsight'
-Evaluation of first diagram, words such as 'although, other factors effect' talk about stakeholder's affected
(Evaluation is where you use your own knowledge to assess the impact of the ongoing of your analysis)
This would only be applicabe if the economy was in a state of full employment and operating near (or at) its productive potential etc.. etc..

-2nd Diagram / Explanation of what's happening (from the text)
-Analysis of second diagram
-Evaluation of second diagram

-3rd Diagram / Explanation of what's happening (from the text)
-Analysis of second diagram
-Evaluation of second diagram

-Conclusion
This is where you weigh up your argument to come to a finalized conclusion; taking into account you're evaluation of the 3 Analysis points you've made. You say what overall effects may occur, the effect on the economy and add relevant concluding factors in regard to the question. Argue different viewpoints and say which you think has the higher weighting. ALWAYS DIRECT YOUR ANSWER TO WHAT THE QUESTION IS ASKING.
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GeorgeAndLennie
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I'm doing AS and the exam board is Edexcel

Could you give an example of an analysis then evaluation? Finding it quite difficult to write about one policy objective that conflicts with a macroeconomic objective..
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gr8wizard10
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(Original post by GeorgeAndLennie)
I'm doing AS and the exam board is Edexcel

Could you give an example of an analysis then evaluation? Finding it quite difficult to write about one policy objective that conflicts with a macroeconomic objective..
Okay, it's fairly simple. Think of AD/AS diagram.

Analysis is just chain links so:

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Increase in government spending (Demand-side fiscal policies such as increasing benefits or Job seekers allowance) > Increase in AD (government spending is a component) > Increase in employment > multiplier effect > Increase in consumption & consumer confidence > Increase in GDP > increase in price level (potential for higher rate of inflation and this is the conflict. (Obviously you'd write this in a sophisticated structure with sentences.)

Now your evaluation could be: The initial controlling of the macro-economy via demand side fiscal policies may increase in national output and achieve economic growth, however assuming AS stays constant, it will also increase the inflation rate (as suggested by the first diagram.) The effects of inflation could be damaging as it makes the UK less internationally competitive in the global markets, which mat effect the already huge balance of trade-deficit. There's a likely trade-off between economic growth and inflation. Policies which can be used to counteract that, could be the usage of supply side fiscal policies such as spending on education and training in order to improve the economy's productive potential (LRAS). This will alleviate demand-pull inflationary pressures and stabalise prices whilst increasing economic output (as shown in the second diagram.)

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This is all one point which could be made. This is the conflict between economic growth via expansionary fiscal policies & inflation. The evaluation just critiques your analysis to show that you understand the potential drawbacks and the conflicts between the macroeconomic objectives.

You should start researching about macro-economic conflicts as they gain easy marks when evaluating most macro-economic essay questions :rolleyes:. Here's a good place to start : http://tutor2u.net/economics/revisio...rade-offs.html
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GeorgeAndLennie
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Oh right! That makes much more sense than what I've read on some websites lol. It was clear and straight to the point.
Thank you, if I could I'd give you a million thumbs up... but that's impossible haha.
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ineedtorevise127
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(Original post by GeorgeAndLennie)
I'm not sure how to answer this question. I'm confused:

"How does demand-side policies conflict with the macroeconomics objectives?"

Apparently I have to talk about expansionary fiscal policy. But I have no idea what to write. How to structure etc. Could someone help please

Introduction - define macroeconomic objectives

Economic growth, unemployment, inflation etc... and demand side policies give examples such as fiscal policy (lowering taxation and increase govt spending) and perhaps monetary policy (decreasing interest rates) also focus on C+I+G+X-M

First point - Reducing taxation. Explain this with a diagram show AD shifting to the right this should in theory cause consumption to rise because more disposable incomes, people should spend more, causing C to rise this should be encouraging because consumption makes up around 60-65 percent of AD. You can argue that this will lead to more economic growth in the short run as consumption should rise also perhaps investment may also rise because if more demand is needed, possibly more workers will be needed, therefore firms take on more, unemployment falls, this is good for govt because they do not have to go into a budget deficit

Second point - Lower interest rates - this should leave people with more disposable incomes e.g. mortgages and possibly lower credit card costs. If mortgages are cheaper, more people should be buying homes, labour is a derived demand , so more builders will be needed to potentially build new homes you can give a recent example e.g. Help to Buy scheme has caused more jobs to builder in the UK. Lower interest rates are also good for the government in the short run because they can borrow cheaper so perhaps they can kickstart the economy but this comes to an expense of potential lower economic growth in the long run because debt starts to build up so more cuts will be needed and govt spending will also fall example of this is the current Conservative govt who aim to spend every less and I think in 2018/19 they should have a budget surplus

Evaluation - How long can this growth last? If its temporary growth is it worth it because in the long run you are still going to have unemployed people? Demand side policies can be very inflationary perhaps you could draw a Keynes diagram showing inflation this has implications such as making our exports less price competitive than countries with lower inflation rates possibly. Also if govt lowers taxes, were will they finance future spending from this can in the expense of more job cuts so it may be a no gain policy. Also you can talk about MPC and MPS lower income people have a higher marginal propensity to consume than rich so perhaps it should only be aimed at them. However, perhaps big businesses should be given reduction corporation tax, causing taking more people on, bigger investments, investment shifts the ppf outwards so this could not only be a short term but long term policy.

Final - every policy has its strenghts and weaknesses but we need a combination of supply side and demand side policy to be successful. However this is easier said than done when your high in debt give examples countries like UK (90 percent GDP I think) , Greece or Portugal where will the money come from? Also are politicans willing to invest in the long run it looks unlikely as their aim is to gain relection in the next 5 years rather than helping sustained long term growth. Then finally give an example Germany has benefitted positively since WW2 due to their focus on long term as well as short term policies

I may have missed macreoconomic objectives out at times always refer to it every paragraph good luck I hope this is right!
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GeorgeAndLennie
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Your post was amazing.
But I was confused that you didn't really say how it conflicts with the objectives most times...
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