Macroeconomic+Summative+Assessment

1What are the costs of high inflation? What policies are effective in reducing inflation?

2 (a) Briefly explain the various major objectives of macroeconomic policy.(10)

Candidates should briefly explain the goals of price stability, full employment, satisfactory balance of payments, economic growth and a more equal/unequal distribution of income and wealth.

(b) Critically examine the view that the control of inflation should always be the most important objective of governments.(15)

• justification of the view in terms of the various ill-effects of inflation

• challenging the view in terms of

– situations in which inflation may not be a problem

– the trade-off between inflation and unemployment

– reasons why full employment should be the priority

– reasons why economic growth should be the priority

– reasons why the balance of payments should be the priority

– reasons why income and wealth distribution should be the priority

3(a) Explain the various costs of unemployment.(12) Candidates should outline the financial, economic, social and individual costs of unemployment. Better responses might also point to the fact that unemployment is often very unequally experienced in terms of region, gender, race and age.

b) Evaluate the alternative policies aimed at reducing unemployment.(13) <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Possible measures include: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">-demand side (for cyclical unemployment) including <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">– fiscal/budgetary <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">– monetary <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- supply side (for structural unemployment) including <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">– educational/training <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">– flexible working practices <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Give credit for responses to other ”types’ of unemployment There should be some evaluation to reach band 4.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">More macro essays and mark-schemes:

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