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Paper 3 of the Edexcel economics A-Level course requires you to carefully consider both the micro and macro economic implications of economic events, policies, strategies and crises. These colourful, easy to use and detailed tables provide a scenario, listed with its micro and macro implications, and synoptic points in order to send your answers to A* quality. A unique resource that will extend your knowledge beyond the classroom. These notes will be particularly useful for students impacted by the COVID-19 crisis, as these topics are typically taught in the final term before the A-Level examinations.


Cutting Public Expenditure :

Macroeconomic Impacts
• Reduction in AD and AS- government spending a component and AS expansions normally funded by government
• Disinflationary impact - reduction in the amount of consumption in an economy, could be inflationary if the cut means a reduction in subsidies
• Reduction in living standards- less provision of the goods and services that public expenditure bring
• Reduction in competitiveness- or increase if it allows the market system to work more officially
• Worsen balance of payments if it means that British firms are less efficient and competitive
• Improvement in national debt in long run if it means no longer running budget deficits
• Decrease in social welfare if it means that government expenditure reduction removes provision of merit and public goods
• Could increase globalisation if it means less protectionism - decrease globalisation if it reduces the amount of national income- Marginal Propensity to Import

Microeconomic Impacts
•Reduction in the quantity supplied of public or merit goods or goods which depend on government expenditure
• If public spending has crowded out private spending then individual economies might witness more investment and the ability to be more efficient and competitiveness
• Price of goods likely to increase
• Living standards likely to significantly decrease- not the case if reduced
spending is a result of reduced taxes
• Profits likely to decrease if less consumption- might increase for firms
replacing government institutions
• Personal debt likely to increase as government spending covers spending
that would have to be taken on by the individual
• Increase in private costs, reduction in private and social benefits
• Workers might become unemployed
• Public Sector workers have reduced income if the cut in spending is a cut in wages

Synoptic Points

  • Depends how the government expenditure was funded
  • What services are removed as a result of the cut
  • If it means the removal of inefficient subsidies possibly a good thing?
  • Reducing arms spending - might mean more meaningful exp.


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