EconplusDal’s Analysis and Evaluation Pack Macroeconomics EconplusDal’s Analysis and Evaluation Pack Macroeconomics Market Based Supply Side Policies [> Warket Based Supply Side Policies ~ Policies reducing the role of government Hat imto shi LRAS tothe right by Increasing the economy's productive potential ‘Market Based Supply Ske Policies ~Tax Reform [How they shit LRAS) Price Level LRASI LRAS 2 Real GOP Vfet Yfe2 3g the mar ate of cane ae Rig rin ns nie ae to wa 2) Recing corporat tax Reducing corporation tx ncren teste rca fr fume to inves. rms ‘Market Based Supply Side Policies - Labour Market Reforms (How they shift LRAS) 2 Reduclng he power of trade unions. Reducing 38 lon Bower edves the costo proton for, holder longer matery/iterty leave, a of whch rae the cst et poduction or fe Oy 4) Redueng/abcshing minimum wages. Ths rece the css of poston Hs i inusties such a6 rea ese, hasta, recreation, supermarkets and domes serves By ting such 5) duchg unemployment beefs nan econery Tis increases thencetv fr the acto ‘Market Based supply ide Policies ~ Competition Policles (How they shift LRAS) marie to mate pra, icreasng competion. Compettion apd the pratt mismiation Sects ines, lw regarding wring condtion nd plnrng veg.atons. Ths gna reduce the conte ot ‘As LRAS increaves due wo sucossll suppysde pales 1) Growth. Potential and acl grout) increases from YFE to YFE2. This is because wit (rater demand ne econamy. fms respond ty increasing cup This reese i tpl is Sin ncrease real GOP. whichis an intense n economic growth 2) Unemployment. Unerloymert decreases. This is because Kbou sa derived oman, ‘ved tary the demand fr goods an aorvees. As the gemand for goats and serdces Is hiph rms wa need more worhare lo produce extra ous, his reducing unemployment 3) Infaton. Cost push inlaion decreases from PH to P2. This & because thee Is ess pressure on factors of production recucng the rate of her price Inreases hus reduc the Fae al ubich the pres ef goods ana series the 4) Trade Position. The vade poston inte econay i ky 1 improve. Thi is because with ‘tower fat rate, exports are more comple, nceasng the demand fo" them and re fevenve brooghtin bytheEconplusDal’s Analysis and Evaluation Pack Macroeconomics EconplusDal’s Analysis and Evaluation Pack Macroeconomics Chapter 5 ~ Balance of Payments 5.1 The Current Account of the Balance of Payments [> alance of Payments = Record ofall nierational wansactons between one ourtry And the rest ofthe word }- Guerent Recount ~ Measures thet ‘ot rade n goods & services ne ‘Demand Side Causes of» Current Account Defi (Opposite fora Surp ls) 2] eon ston ow re sro sane hones al ons he ere ‘pore and tare the revenue gnerted by exports wil decrease Both ete wll worn the Supply Side Causes of Current Account Deficit (Opposite fora Surplss) 21 low shou prouctity. ow labour praditty means output pe hour worked low relative to tor counties ound the word Tis cease unt bout css, « mij coittprodxion or 2} Mighrminanun wes. gh simu wagesrlave to comoettarcounrie who ether donot ave Dwoduction for Mg, who wil rele auch conte higher pres charged reduce the pie 4 gee Relate ian. a coutry has higher inflation rts telat tocompetter counts, the 5) Goverment resrcon on fee trade. I een spvetnmeres neste or Impoi new trae barnes 1 Resource Depletion, Tiss rong argument inthe cat of developing counties in part where 5.2 Consequences ofa Current Account Deft hh reduces the alu of (inthe AD equate, causing AD Ye derense kom ADI Yo AD? Price Level LRAS WWIEconplusDal’s Analysis and Evaluation Pack Macroeconomics EconplusDal’s Analysis and Evaluation Pack Macroeconomics Growth Poverty Cycle Development Poverty Cycle Low Low Access to Health and Savings Education ZN. / Low Investment ’ Low Human Ne \ 7 Growth Productivity 2) tcofinnce can leva poverty and eate Jobs for other. Ths is because 25 pos ad nee 3) mcrianee provides 3 means t@ nance whee efi! Lenders may ret eer smal sae ‘ver alone! pid time Ata consequence, ndhidualtcan spend te money on capa onge ter investment trowing tat breathing pace ests beloe a return needs tbe made alowe for ‘Microfinance and Development Cons/Evaluation 17h presumption of micrtoace schemes i tat everybusness venture wil be ces but th is eran not the cat. No mater how Inpresive the etreorencur might be, runing utc bonne efit and Kil of tk, Ara consquance Hf usinees dof, Indsal th vry ow aluaton To overome ths sue, micrfaance loans re usualy sued wth a mentor or regular tevin witha pei provid ulree an suppartto err tht evening posble done to Icrotnnc oars tena oben to oups of people her anon an nda att gah 2 Tere age skh mlrofiranc tutions become prot mated rte tan their motes being rated promoting deve aleviting poverty. Conseqenty, eres ate cha ‘maneyto beter he hing sande of thei ary other han invest in bain vt. Ts 9.6 Trade and Development Trade and Development Pros 1 ree, srowh and ving standards, Trade allows devlosing countries te specu the entation Trang to economic gewth Conseqverth, GMespta wil ise mong base Messing goods ad Seraees mare alone, Ming peopl ot of poverty Smultareosy, ob prospects he corny wl rin athe Inrease a cemand wi encourage mesic me to ineeoe thet utp, tat 2] Tade, gah and the fal dvidend. (poring ans depending on the revenues fom prinary ommodier con ska prose ail Sdend ar governments renutng Korba canon row lower cots a Niger producti and Slowing fares o ater chook and Peps more ey,