Economics 9708/22 — February/March 2021
Cambridge AS Level · AS Level Data Response and Essays · worked solutions for every part, with the mark scheme
Topics Price Stability · Fiscal Policy · Exchange Rates · Monetary Policy · Production Possibility Curves · Supply-Side Policy · +6 more
Challenges for the Japanese economy.
Table 1.1 Japan: Selected Economic Indicators 2014–2019
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Source: Cabinet Office of Japan in IMF World Economic Outlook, April 2019
Extract 1: Japanese consumer prices rose by only 1.0% in 2018
Japan is the world’s third-largest economy and continues its long battle to boost weak inflation. The
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In an attempt to boost inflation, the BOJ has persevered with low interest rates, and has repeatedly said it is not going to stop using this strategy, even as other central banks around the world begin raising interest rates.
Source: The Japan Times, 18 January 2019
Extract 2: Japan’s government ready to use fiscal policy to offset economic risks
Japan’s government has signalled its readiness to increase government spending next year if it is necessary to offset risks to the economy that are likely to arise from the trade war between the United States and China. These risks could add to the pressure on Japan’s government to increase its spending ahead of a planned increase in sales tax in October 2019.
In a long-term fiscal policy plan, the government said it is ready to use macro-economic policy ‘without hesitation’ if a downturn in foreign economies poses risks to Japan’s economy. Despite this, the Japanese government plans to raise the sales tax to 10% from 8% in October, and this would reduce consumption spending, which makes up roughly 60% of Japan’s aggregate demand, at a time of slower demand from abroad. The previous sales tax rise to 8%, from 5%, in 2014 hit consumption and was blamed for a slump in the Japanese economy.
Source: The Daily Times, 16 July 2019
Calculate the rate of inflation in Japan from 2014 to the estimate in 2019.
With reference to Table 1.1 identify one piece of evidence that suggests that Japan has not been using an expansionary fiscal policy before 2019.
Explain why deflation, as experienced by Japan, discourages consumption spending.
Use a diagram to explain what you would expect to happen to the Yen : US dollar exchange rate if the Bank of Japan continued with low interest rates, ‘even as other central banks around the world begin raising rates’.
Discuss how continuing with an expansionary monetary policy is expected to boost inflation and consider whether it is likely to be successful.
Discuss whether increases in government spending can offset risks to Japan’s economy if a downturn in foreign economies occurs.
The rest of this paper
3 more questions- Q2Production Possibility Curves · Supply-Side Policy20M
- Q3Elasticities of Demand · Protectionism20M
- Q4Demand and Supply · Market Equilibrium and the Price Mechanism · Reasons for Government Intervention in Markets · Methods of Government Intervention in Markets20M