How government deficits affect long-run economic growth.

  1. Explain how government deficits affect long-run economic growth. Explain how this effect is transmitted. You should complement your explanations with some graphs.
  2. What is economic growth? Is it the same as increasing the wellbeing and living standards of the population? Explain the links between economic growth and each of these concepts: consumption, investment, and public policies (20%).
  3. In the Eurozone, which institution oversees monetary policy, and which one controls fiscal policy? The main goal of the European Central Bank is controlling inflation. Why it is so important? Define aggregate demand and aggregate supply in the long-run and short-run (use graphs) and explain the main effects of rising prices in the economy (20%).
  4. Provide two examples of fiscal policies in the face of an economic crisis and discuss their positive and negative effects on aggregate demand. Use the concepts of “multiplier effect” and “crowding-out effect” (20%).
  5. Explain what the expected impact of the fall in international trade on the Eurozone economy might be. Use the AD/AS model and the concepts delivered in unit 8. This section must include a written explanation and charts (20%).