Suggested Answers of BT2 Revision Package - ASKnLearn

ConclusionTo have sustained actual growth there must be potential growth. Once an economy reachesfull employment, the productive capacity has to be increased to allow for further actualoutput to increase. Supply-side policies targeting the increase in potential output is ongoingfor all economies. Demand side policies targets actual growth. Which policies work best willvery much depend on the current state of the economy and the nature of the economy. Forsmall and open economies, demand-side policies like the conventional monetary and fiscalpolicies may be inappropriate or less effective. Such economies use supply-side policiesmore actively to achieve economic growth. In a recession, fiscal policy can be moreappropriate than expansionary monetary policy. The latter works well in an inflationarysituation. To achieve sustained growth, countries will usually use a mix of policies.L1L2Definitions of actual and potential growth. Identify some AD-side and ASsidepoliciesExplanation of how dd-management policies can boost AD and SS-sidepolicies boost AS with economic analysis but some gaps in explanationE.g. of gaps- considered only actual growth but not potential growth (vice-versa)- considered only demand management policies but not supply side policies(vice-versa)- explained theories but with little or no examples to illustrate- largely 1–sided without consideration of demerits/limitations1-56-9L3A good analysis of the effectiveness and suitability of these policies (at least2 demand-side and supply-side policies) with good use of examples toillustrate.10-13E1 Mainly unexplained judgement 1-2E2 Judgement based on analysis of the nature and state of the economy 3-4