a level economics

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losteenager15
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Report Thread starter 9 months ago
#1
can somebody please look at my essay

(c) With reference to Extract A, discuss two macroeconomic policies, apart from protectionism, that a government could use to reduce the negative effects of globalisation. (12)

Globalisation is the growth of interdependence between economies around the world and often results in better trade. But there are other side effects like negative externailites, which are 3rd party spillover effects outside of the price mechanism.

One policy that the government can introude is a tariff on imports. A tariff is a tax on imported goods from other countries. This will help to reduce negative effects such as negative externalities by reducing the incentive to import goods. With a reduction on imports, this will mean that ships wont travel across the sea that much. This causes their emissions to decrease, which accounts for 18-30% of world emissions, a negative externality. By doing this, it will help to achieve the macroeconomic objective of a sustainable environment. Therefore, implementing tariffs will help lead to sustainable environment. However, a tariff may not have instant effects on imports as some firms may be tied to contracts, in which they will still have to import raw materials for a short period of time. Despite that its temporary, depending on the state of the environment and how desperate the government needs for imports to stop it may be bad and result in higher levels of global warming. Therefore, tariffs might not work straight away.

Another policy that the govenrment could do to reduce the negative effects is by introducing expansionary fiscal policy for foriegn firms relocating in their country (or FDI). The reason for this is that firms tend to pay very poor wages and harsher working environments leading to a lack of incentive to work and poor productivity will lead to a slower increase in real gdp and therefore not much economic growth.The bank of england said that there was “low wages, insecure employment” and so y implementing fiscal policy i.e. tax cuts, these firms will be able to reduce their costs significantly and target more of their profits to increasing wages for their employees and so they stay motivated and have incentives to work. Therefore, fiscal policy can improve living standards for employees of foreign firms. However, this might not even work unless the government has specifically requested to increase the national living wage, otherwise firms such as nike will continue to pay very low wages and maximize their profits from reduced costs. Furthermore, the government will be missing out on tax revenue, and so they wont be able to make investments themselves, constricting aggregate demand. Therefore, firms can still continue to abuse their employees and pay low wages.
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