Paper 3 Economic Effects

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Last updated 8:26 PM on 6/3/26
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10 Terms

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most important Microeconomic effects

  • Market price / consumer and producer surplus — appears in almost every question. Whether it's a tax, interest rates, trade blocs, or minimum wage, price effects on consumers and producers is always relevant.

  • Efficiency of firms — economies of scale, productive and allocative efficiency. Comes up whenever firms are involved (Starbucks, HCWs, energy, coffee shops).

  • Wage determination / supply and demand for labour — gender pay gap, minimum wage, labour shortages, literacy skills all directly test this.

  • Externalities / merit and demerit goods — sugar tax, HFSS tax, education spending, infrastructure all link here.

Elasticities — links to almost everything. PED affects tax incidence, trade effects, revenue changes.

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most important Macrooeconomic effects

  • AD and the multiplier — this is the single most versatile macro point. Investment, government spending, trade, interest rates — everything shifts AD. Always draw the diagram.

  • Exchange rate — comes up constantly. Depreciation, trade competitiveness, imports/exports, balance of payments.

  • Unemployment and economic growth — virtually every question touches these as consequences.

  • Inflation — interest rates, taxes, minimum wage, commodity prices all link here.

Current account / balance of trade — protectionism, trade blocs, specialisation, competitiveness questions all need this.

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Trade unions micro and macro effects

Micro
1.Wages and employment

  1. Non-wage worker benefits

  1. Higher costs for firms

Macro

  1. Unemployment

  2. Inflation

  3. Int competitiveness + current account

  4. Growth

  5. Gov finances

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Strike Action micro and macro effects

Micro

  1. Wages

  2. Non-wage benefits

  3. Lower revenue/ profits for firms

Macro

  1. Growth + living standards

  2. Gov finances

  3. inflation

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Immigration micro and macro effects

Micro

  1. Wages and Employment

  2. Efficiency  and productivity

  3. House prices

Macro

  1. Growth

  2. Inflation

  3. Government Finances

  4. Living Standards

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Free Trade Micro and Macro Effects

Micro

  1. Economies of Scale

  2. Lower prices

  3. Higher Quantity

  4. Tech Diffusion

  5. Higher Profits

Macro

  1. Growth

  2. Unemployment

  3. Inflation

  4. Current Account

  5. FDI

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Reasons for Protectionisms

Micro

  1. Infant Industry

  2. Dumping

  3. Standards/regulation

Macro

  1. Unemployment

  2. Inflation

  3. Int competitiveness + current account

  4. Growth

  5. Gov finances

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Protectionism Macro and Micro effects

Micro

  1. Unemployment

  2. Current Account

  3. Growth

  4. Inflation

  5. Inequality

Macro

  1. Higher Prices

  2. Lower Quantity

  3. Domestic producer revenue

  4. Foreign Producer Revenue

  5. Inefficiency

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Weak Exchange Rate Macro and Micro effects

Micro

  1. Current account

  2. Growth

  3. Unemployment

  4. Inflation

  5. FDI

Macro

  1. Increased costs + decreased profits for firms

  2. Inefficiency

  3. Foreign Debt burdens

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Factors that weaken a currency

Micro effects

  1. Current Account Deficit

  2. Poor macro performance

  3. Lower interest rates

  4. QE

  5. Outward direct investment

Macro effects

  1. Lower Export Demand

  2. Higher Import Demand