Contextual Analysis (Examples)

Question 1

example of low interest rates

Answer 1

• after EU referendum
• BoE interest rates reduced to 0.25%
• preemptively to prevent a reduction in GDP growth due to brexit creating uncertainty for the UK economy

Question 2

example of high interest rates

Answer 2

• america(2009 to 2020) experiences their longest ever economic expansion
• to prevent demand-pull inflation

Question 3

example of central banks acting as a lender of last resort

Answer 3

• 2008 financial crisis
• Federal Reserve lent to several Wall Street banks to prevent insolvency
• Fed decided to not to lend to the Lehman Brothers and allowed them to become insolvent to prevent government failure

Question 4

example of quantitative easing

Answer 4

• response to covid
• european central bank announed a 750 bn euro public sector purchase programme

Question 5

example of decreasing corporation tax failing

Answer 5

• UK decreased corporation tax by 9% from 2010 to 2019
• investment delayed by uncertainty from Brexit and US-China trade war

Question 6

example of countries following fiscal austerity

Answer 6

• 2010-12 european debt crisis
• Greece forced to cut spending and raise taxes to deal with their national debt
• increased unemployment and decreased economic growth by 25%
• training and education spending reduced by 20%

Question 7

example of investing in education

Answer 7

in 2019, UK government spent £400 mil on improving schools and pledged to raise teachers’ salaries to £30,000 by 2022

Question 8

example of investment in manufacturing and technology

Answer 8

• China ten-year plan
• research and development subsidies in the aviation industry, railway equipment, information technology etc

Question 9

example of policies for the workforce

Answer 9

• boris johnson 2020 immigration plan
• allow migrants citizenship if they had sufficient educational qualifications
• higher skilled workforce

Question 10

example of firms moving countries due to tax

Answer 10

• UK reduced corporation tax
• appealing to Jaguar Land Rover
• plans to build a warehouse in the west midlands
• contribute to tax rev
• supply jobs

Question 11

example of investment in transport infrastructure

Answer 11

• HS2
• increase labour mobility

Question 12

example of a fixed exhange rate

Answer 12

• UAE against america
• promote stability of oil prices following several shocks that have triggered global recessions

Question 13

example of managed exchange rates

Answer 13

• chinese policy makers cutting interest rates
• incentive for hot money outflows
• Yuan devalued
• exports cheaper = increase demand

Question 14

example of activity not allowed by the WTO

Answer 14

• America giving illegal subsidies to Boeing
• reduce firms CoP = lower price to consumers
• adverse impact for the competitiveness of Airbus (european-owned counterpart)
• EU permitted to add tariffs to $4 bn worth of US imports to compensate