A2 EconomicsA2 Economics

RevisionRevision

Limits to Growth and DevelopmentLimits to Growth and Development1.1. Why are investors in Kenya reluctant to build new Why are investors in Kenya reluctant to build new

offices?offices?2.2. What happened in Kenya at the start of 2010?What happened in Kenya at the start of 2010?3.3. What is disappointing about the fact that black What is disappointing about the fact that black

children in South Africa still lag behind their white children in South Africa still lag behind their white counterparts in terms of educational attainment?counterparts in terms of educational attainment?

4.4. How was Angola’s GDP growth between 2006 and How was Angola’s GDP growth between 2006 and 2009 affected by the recession?2009 affected by the recession?

5.5. How has oil helped Angola?How has oil helped Angola?6.6. Why has a whole generation in Angola missed their Why has a whole generation in Angola missed their

education?education?7.7. Why did hyperinflation occur in Zimbabwe?Why did hyperinflation occur in Zimbabwe?8.8. Why have malaria nets campaigns damaged Why have malaria nets campaigns damaged

economic growth in many African countries?economic growth in many African countries?9.9. How did the HIPC initiative help Uganda?How did the HIPC initiative help Uganda?10.10.By 2012, what proportion of Rwandan children aged By 2012, what proportion of Rwandan children aged

between 9 and 12 will have a laptop?between 9 and 12 will have a laptop?

Limits to Growth and DevelopmentLimits to Growth and Development1.1. Why are investors in Kenya reluctant to build new offices? Why are investors in Kenya reluctant to build new offices? Patchy Patchy

electricity serviceelectricity service2.2. What happened in Kenya at the start of 2010? What happened in Kenya at the start of 2010? 3 new fibre-optic cables 3 new fibre-optic cables

arrivedarrived3.3. What is disappointing about the fact that black children in South What is disappointing about the fact that black children in South

Africa still lag behind their white counterparts in terms of educaitonal Africa still lag behind their white counterparts in terms of educaitonal attainment? attainment? There has been significant investmentThere has been significant investment

4.4. How was Angola’s GDP growth between 2006 and 2009 affected by the How was Angola’s GDP growth between 2006 and 2009 affected by the recession? recession? 20% to 1.5%20% to 1.5%

5.5. How has oil helped Angola? How has oil helped Angola? Helped to bring peace and prosperity, the Helped to bring peace and prosperity, the port is being modernised and new roads and railways are being builtport is being modernised and new roads and railways are being built

6.6. Why has a whole generation in Angola missed their education? Why has a whole generation in Angola missed their education? 14 14 year war of independence with Portugal followed by 3 decades of year war of independence with Portugal followed by 3 decades of fighting between communists and pro-Western groupsfighting between communists and pro-Western groups

7.7. Why did hyperinflation occur in Zimbabwe? Why did hyperinflation occur in Zimbabwe? Government began Government began printing moneyprinting money

8.8. Why have malaria nets campaigns damaged economic growth in many Why have malaria nets campaigns damaged economic growth in many African countries? African countries? Nets were imported, which led to the loss of local Nets were imported, which led to the loss of local manufacturersmanufacturers

9.9. How did the HIPC initiative help Uganda? How did the HIPC initiative help Uganda? Money saved from debt relief Money saved from debt relief was spent on improved education and healthcare including a was spent on improved education and healthcare including a programme about HIV and AIDSprogramme about HIV and AIDS

10.10. By 2012, what proportion of Rwandan children aged between 9 and 12 By 2012, what proportion of Rwandan children aged between 9 and 12 will have a laptop? will have a laptop? AllAll

Draw the Harrod-Domar ModelDraw the Harrod-Domar Model

Put these in the correct orderPut these in the correct order

Supply-Side PoliciesSupply-Side Policies• Explain how each of the Explain how each of the

following will remove following will remove labour market labour market imperfections and imperfections and achieve a lower achieve a lower equilibrium rate if equilibrium rate if unemployment:unemployment:– Reform the welfare Reform the welfare

system to reduce the risk system to reduce the risk of the poverty trap.of the poverty trap.

– Reduce trade unions’ Reduce trade unions’ collective bargaining collective bargaining power.power.

– Reduce income tax.Reduce income tax.– Relax immigration laws.Relax immigration laws.

Expectations-augmented Phillips CurveExpectations-augmented Phillips Curve

Long-Run Phillips CurveLong-Run Phillips Curve

D

D

A The economy is operating at the NRU and workers A The economy is operating at the NRU and workers expect inflation to be 3.5%.expect inflation to be 3.5%.

B Workers expect inflation to increase B Workers expect inflation to increase to 4.5% and demand higher wages. to 4.5% and demand higher wages. Firms mistakenly expect sales to rise Firms mistakenly expect sales to rise due to the price rises and hire extra due to the price rises and hire extra workers.workers.

C Workers refuse to supply labour at 4.5% inflation C Workers refuse to supply labour at 4.5% inflation and firms refuse to demand labour.and firms refuse to demand labour.

D There is an increase in aggregate demand due to government D There is an increase in aggregate demand due to government subsidies for new industries, which causes workers to seek new subsidies for new industries, which causes workers to seek new jobs and firms to re-employ workers.jobs and firms to re-employ workers.

Cost-push inflationCost-push inflation Demand-pull inflationDemand-pull inflation

Match the DefinitionsMatch the Definitions• The government’s annual The government’s annual

announcement of changes to its announcement of changes to its planned levels of spending and planned levels of spending and taxationtaxation

• The proportion paid in tax falls as The proportion paid in tax falls as income increases.income increases.

• People or firms with the same People or firms with the same income and/or financial income and/or financial circumstances pay the same circumstances pay the same amount of tax.amount of tax.

• When taxes are earmarked for a When taxes are earmarked for a specific purpose eg Labour 1990s specific purpose eg Labour 1990s (education)(education)

• Taxes should be linked to the Taxes should be linked to the benefits received by taxpayers.benefits received by taxpayers.

• The proportion of income paid in tax The proportion of income paid in tax stays the same as income stays the same as income increases.increases.

• The characteristics of a ‘good tax’ The characteristics of a ‘good tax’ (Adam Smith).(Adam Smith).

• The amount people or firms pay is The amount people or firms pay is based upon their ability to pay.based upon their ability to pay.

• Modern list of characteristics of a Modern list of characteristics of a ‘good tax’.‘good tax’.

• The proportion paid in tax increases The proportion paid in tax increases as income increases.as income increases.

• Proportional taxProportional tax

• Principles of taxationPrinciples of taxation

• Benefit principleBenefit principle

• Canons of taxationCanons of taxation

• Progressive taxProgressive tax

• The BudgetThe Budget

• HypothecationHypothecation

• Horizontal equityHorizontal equity

• Vertical equityVertical equity

• Regressive taxRegressive tax