This is a set of 25 Economics Essays on all the micro economics topics, which are fully written and up to a star standard. These cover a wide range of topics which will come up in the exam, and will save you a lot of time when revising, as you will not have to make as many essay plans, as you can e...
1. Using the data and your own knowledge, evaluate the effectiveness of monetary
policy in achieving macroeconomic stability in the UK. (25) 3 2. Discuss the view that
achieving full employment will inevitably cause trade-offs with other macroeconomic
objectives. (25) 5
3. Evaluate whether economic growth will reduce poverty? 7
4. Compare the effectiveness of supply side and demand side policies to correct deficits
on a country’s current account of the Balance of Payments (25) 10
5. Assess the economic effects of a significant increase in taxation on the UK economy
(25) 11
6. Discuss the impact of globalisation on UK economy (25) 13
7. Both the UK and US balance of payments accounts are recording large deficits on their
trade in goods balance. Do such deficits matter? (25) 15
8. Explain how countries benefit from international trade even though they may
produce similar goods and services. [10] 17
9. Discuss the factors that determine the trade competitiveness of the UK economy. (15)
17
10. Discuss the importance of promoting free trade through organisations such as the
WTO (25) 18
11. A Government is faced with an unacceptably high level of unemployment, but does
not wish to increase its overall expenditure. Discuss alternative policies for reducing
unemployment. (25) 20
12. Explain possible economic reasons for government borrowing. (10) 22 13. Evaluate
the possible problems for the UK economy of increased government borrowing. (25) 23
14. Explain possible causes of economic growth. (10) 25
15. Evaluate the potential impact on the economic growth of the UK economy if it were
to adopt the single European currency. (25) 27
16. Discuss policies to reduce inflation (25) 28
17. Evaluate the impact on UK macroeconomic performance of a sustained rise in the
value of the Pound against the dollar and Euro (25) 30
18. Evaluate the possible consequences of a falling rate of inflation for the performance
of the UK economy. (25) 32
19. Discuss the impact of an increase in interest rates (25) 34
20. Discuss how the government might improve the UK’s long term economic growth.
36
21. Discuss factors that may limit economic growth rates in different countries. (25) 38
22. Discuss the problems an economy might face in recovering from a period of
recession? (25) 40
23. Assess the impact on UK macroeconomic performance of a prolonged period of
deflation. (25) 42
24. Evaluate market-based and interventionist policies for promoting economic
development (25) 44
25. Evaluate whether the receipt of remittances benefits developing economies. 46
2
,1. Using the data and your own knowledge, evaluate the
effectiveness of monetary policy in achieving
macroeconomic stability in the UK. (25)
Graph 1
Graph 2.
Monetary policy involves attempts to control and influence the money
supply and demand for money. The main tools of monetary policy are
changing base interest
,3
rates and also other policies such as quantitative easing. Monetary policy
is operated by the Bank of England and seeks to meet the government’s
objectives for macroeconomic stability. This involves meeting an inflation
target of CPI 2% +/-1. It also involves maintaining a stable and sustainable
rate of economic growth and achieving a low rate of unemployment.
Macro-economic stability can also involve a stable exchange rate and a
manageable current account deficit.
, Since the early 1990s, monetary policy has been relatively successful in
keeping inflation low and close to the government’s target of 2%. When
inflation rises above the government’s target, the Central bank can
increase interest rates. A modest rise in interest rate can help to reduce
inflationary pressure. This is because higher rates increase the cost of
borrowing and discourage firms from investing. Higher interest rates also
increase the cost of mortgage payments and loan repayments – leading to
less disposable income for households and therefore, households tend to
cut back on consumer spending. This slowdown in consumer spending
reduces the rate of economic growth and therefore reduces demand-pull
inflationary pressures.
Since 1992, the UK has avoided the boom and bust cycles which
characterised the late 1980s when inflation rose to nearly 10%. The
independent Central Bank has, therefore, gained a reputation for keeping
inflation under control. The independence from political pressures means
people in the economy have more confidence that inflation will be low.
This helps to reduce inflationary expectations and this makes the job of
achieving low inflation easier.
Graph 2 shows that there have been times when the UK has had inflation
above the government’s inflation target, e.g. in 2008 and 2011. This
inflation was due to cost- push factors – rising oil prices, rising taxes and
devaluation, causing rising import prices.
On the one hand, this inflation of 5%, suggests that monetary policy is not
guaranteed to keep macro-economic stability. Due to circumstances
beyond its control, inflation rose above the target; monetary policy is
ineffective for both solving cost-push inflation and keeping the economy
growing. However, on the other hand, the Bank’s decision to allow
temporary cost-push inflation could be seen as the best way of achieving
macro-economic stability due to more difficult external circumstances. If
the Bank had tried to reduce inflation – it would have caused lower rates
of economic growth.
The other element of macroeconomic stability is avoiding recession and
maintaining economic growth close to the long-run-trend rate of 2.5%.
Graph 1 shows that from 1997 to 2007, economic growth was positive and
averaging around 0.75% per quarter or 3% per year. However, in 2008/09,
the UK economy went into a deep recession. At this time, the Bank of
England cut interest rates drastically to 0.5%. In theory, lower interest
rates should boost aggregate demand. With cheaper borrowing costs,
firms will find it more profitable to invest, and consumers will be more
willing to take out loans and spend. However, despite a small recovery in
2010, the economy remained stagnant in 2011. This suggests that
monetary policy alone may be insufficient to ensure a return to normal
growth. In this period, there was still a credit crunch with banks unwilling
to lend. Confidence was also very low, so even though it was cheap to
borrow, consumers and firms were reluctant to take out loans. Also in
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