prompt 2 - (The job loss economy)

Front: How does mass unemployment affect aggregate demand (AD)?

Back: Unemployment reduces consumer spending and business investment, causing aggregate demand to shift left.

Front: Why is the UK situation more complicated than a normal recession?

Back: The UK is already experiencing stagflation from high energy prices, meaning slow growth and persistent inflation are happening at the same time.

Front: What type of fiscal policy should the government use?

Back: Targeted expansionary fiscal policy. meaning it increases spending and/or temporarily lowers taxes to stimulate economic activity during a slowdown.

Front: What spending policies should the UK government use?

Back: Transfer payments, job-support programs, and temporary energy subsidies for affected households and workers.

Front: What should happen to taxes during the slowdown?

Back: Temporary tax reductions for lower- and middle-income households to encourage spending.

Front: Why should fiscal stimulus remain targeted instead of massive?

Back: Because inflation is still above the Bank of England’s 2% target, and excessive stimulus could worsen inflation.

Front: Quick summary of the full policy response?

Back: Use targeted government spending and temporary tax cuts to support workers, while the Bank of England cautiously lowers interest rates to encourage spending and investment without worsening inflation too much.