Contextual Analysis

• What is the main focus of microeconomics?

  Microeconomics studies how individual consumers and firms make decisions.
• What are the determinants of Aggregate Demand (AD)?

  • Consumer spending (C)
  • Investment (I)
  • Government spending (G)
  • Net exports (X-M)
• How did the Trump Administration's tax cuts in 2018 affect consumer spending?

  It increased disposable income for consumers, shifting the AD curve to the right.
• What was the impact of the coronavirus pandemic on consumer spending in the US?

  It increased the marginal propensity to save, shifting the AD curve leftwards.
• What economic condition did the US experience in 2020 due to reduced GDP?

  The US experienced a recession.
• Which country was projected to see positive economic output at the end of 2020 despite the pandemic?

  China
• What is the Belt and Road Initiative (BRI)?

  It is a global development strategy adopted by China to enhance regional connectivity.
• How has Brexit affected investment in the UK?

  It has deterred investors due to uncertainty surrounding the future of an independent UK.
• What would be the consequence of a no-deal Brexit on UK trade?

  The UK would face larger tariffs on exports, damaging GDP.
• What are T-level courses in the UK?

  They are technical-based qualifications for 16-18 year olds equivalent to 3 A-level grades.
• How did Greece's public debt-to-GDP ratio affect its economy in 2010?

  It reached 146%, leading to austerity measures and reduced government spending.
• What was the largest Free Trade Agreement (FTA) signed in November 2020?

  The Regional Comprehensive Economic Partnership (RCEP).
• What is the impact of a strong exchange rate on net exports?

  A strong exchange rate makes exports more expensive and imports cheaper, reducing net exports.
• What happens to the SRAS curve when wages increase due to strikes?

  The SRAS curve shifts left due to increased production costs.
• How does the furlough scheme affect the cost of production for firms?

  It lowers the cost of production by subsidizing wage bills.
• What event in 1973 affected oil prices in the US?

  The OPEC oil embargo.
• How does the transition to renewable energy sources affect production costs?

  It reduces reliance on OPEC and lowers overall production costs.
• What is the Border Carbon Adjustment (BCA) mechanism proposed by the EU?

  It is a tax on imports not produced by environmentally-friendly methods.
• What was China's ten-year plan called to expand high-tech sectors?

  "Made in China 2025."
• How does government intervention during the pandemic affect productivity?

  It has led to the rise of 'zombie firms' that are unproductive.
• What is the purpose of the new T-levels introduced in the UK?

  To equip students with relevant industrial skills for better job prospects.
• What is structural unemployment?

  It occurs when workers lose jobs due to technological advances and lack qualifications for other industries.
• How has the coronavirus pandemic affected geographical immobility of labor in the UK?

  It has increased unemployment in the North due to reliance on manufacturing jobs that cannot be done from home.
• What is seasonal unemployment?

  It occurs when temporary workers are laid off after peak seasons, such as Christmas.
• What is cyclical unemployment?

  It is unemployment that rises during economic downturns, such as during the COVID-19 pandemic.
• What is demand-pull inflation?

  It occurs when high demand for goods shifts the AD curve to the right, increasing the price level.
• What is cost-push inflation?

  It occurs when rising production costs lead to higher prices for consumers.
• What was the impact of the 1973 oil crisis on inflation in the US?

  It caused an increase in inflation due to rising production costs from oil price hikes.
• What was the effect of the WTO allowing the EU to impose tariffs on US goods in November 2020?

  It widened the US current account deficit due to increased outflows of money.
• What factors contribute to Germany's current account surplus?

  Low prices due to R&D subsidies and abundant natural resources.
• How has COVID-19 affected global supply chains?

  It has disrupted them, leading to a shift towards more domesticated supply chains.
• What is the trade-off between economic growth and environmental measures?

  Governments may sacrifice economic growth to implement measures that protect the environment.
• What is the Phillips curve?

  It shows the inverse correlation between inflation and unemployment.
• What is stagflation?

  It is a situation of high unemployment and high inflation occurring simultaneously.
• How did the Bank of England respond to the uncertainty created by Brexit?

  It reduced interest rates to stimulate demand and prevent a reduction in GDP growth.
• What is the theoretical effect of low interest rates on demand?

  Low interest rates are expected to stimulate demand.
• What is the impact of low interest rates on investment?


  They encourage more investment from both domestic and overseas firms.
• What is the role of government spending in economic recovery?

  Government spending can stimulate economic activity and increase aggregate demand.
• How does consumer confidence affect aggregate demand?

  Higher consumer confidence typically leads to increased consumer spending, boosting aggregate demand.
• What is the significance of the marginal propensity to consume?

  It indicates the proportion of additional income that consumers will spend on consumption.