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EnglandEconomics

Component 2: Macroeconomics - Macroeconomic policy

4 dot points across 4 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

How does fiscal policy manage demand and the public finances, and what are its limits?

2.3 Fiscal policy: government spending and taxation, the budget balance and the national debt, direct and indirect and progressive and regressive taxes, automatic stabilisers, and the strengths and weaknesses of fiscal policy.
An OCR H460 answer to fiscal policy, covering government spending and taxation, the budget balance and the national debt, direct versus indirect and progressive versus regressive taxes, automatic stabilisers, and the strengths and weaknesses of fiscal policy in managing aggregate demand.
11 min answer →

How does the central bank use interest rates and the money supply to hit the inflation target, and what does the financial sector do?

2.3 Monetary policy and the financial sector: interest rates and the transmission mechanism, quantitative easing, the role of the central bank and the inflation target, the functions of the financial sector, and financial regulation.
An OCR H460 answer to monetary policy and the financial sector, covering interest rates and the monetary transmission mechanism, quantitative easing, the role of the central bank and the inflation target, the functions of banks and the financial sector, and the case for financial regulation.
11 min answer →

Why do macroeconomic objectives conflict, and what does the Phillips curve say about inflation and unemployment?

2.3 Policy conflicts and trade-offs: the conflicts between macroeconomic objectives, the short-run Phillips curve trade-off between inflation and unemployment, and the long-run Phillips curve.
An OCR H460 answer to policy conflicts and trade-offs, covering the conflicts between macroeconomic objectives, the short-run Phillips curve trade-off between inflation and unemployment, the role of expectations, and the vertical long-run Phillips curve.
10 min answer →

How do supply-side policies raise productive capacity, and what are their costs and limits?

2.3 Supply-side policies: market-based and interventionist supply-side policies, their effect on LRAS and the macroeconomic objectives, and their costs, time lags and limitations.
An OCR H460 answer to supply-side policies, covering market-based and interventionist supply-side measures, how they shift long-run aggregate supply and help achieve several macroeconomic objectives at once, and their costs, time lags and limitations.
10 min answer →