Define "The multiplier effect" and explain how it works. Using practical examples of how the east and north London people and firms might benefit from a multiplier effect of the Channel Tunnel terminals.

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Economics Homework for Barry

  1. Define sustainable growth and write and explain using examples.

Sustainable growth is when countries aren’t using up all there non-renewable resources which is good as this can cause problems for the future generations, instead their using their renewable resources which allows future growth to continue. By using up all non- renewable resources it will cause future growth to end, will cause damage to the bio-diversity and may produce unsustainable pollutants, which is very bad for the economy.

Sustainable growth is when the economy increases output in a way which allows future output to continue and increase. This can be done by using more of the renewable resources such as paper, glass and aluminium which can be recycled so that it isn’t wasted allowing future growth to continue. Also to use less of non-renewable resources such as coal, oil which can not be recycled thereby it cause future growth to end.

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  1. Define “The multiplier effect” and explain how it works. Using practical examples of how the east and north London people and firms might benefit from a multiplier effect of the Channel Tunnel terminals.

The multiplier effect is when changes in expenditure to the economy produces a more extensive output upon total economic activity, allowing expenditure to continue feeding the economy. This is usually done from investment expenditure, government spending or exports.

For example if the government increases expenditure in education, this allows to increase expenditure to all other things relating to education as well, such as ...

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This essay is structured well, and this is due to the clear subheadings. There are a few slips in grammar, punctuation and spelling such as "there" instead of "their" and a few sentences which don't make sense. I would advise a proof read to ensure these aren't submitted, as it detracts somewhat from the analysis.

The analysis in this essay is sound. Sustainable growth is explained very well, and I liked how they picked up on the buzzword of "future generations". Whenever referencing sustainability in economics, talking about allowing future generations the same ability to grow and develop, or have the same standard of living, will gain credit. The explanation of the multiplier effect is good, but I would've liked the definition to be a bit more sharp. I would be saying "the multiplier effect is whereby an increase in a component of aggregate demand results in a larger increase in total aggregate demand". I would then go onto say that "the multiplier figure is the amount that the initial increase increases by". The explanation of the mechanism is strong, however, and shows a good understanding of the concept. If the essay wanted to go further, making a reference to marginal propensity to consume to derive the multiplier figure would've been good. It was a shame that the analysis of increases in aggregate supply was weak, as the rest of the essay has strong elements. I would've liked to have seen a diagram showing an increase in aggregate supply, then mentioning the effect on real GDP and thus inflation and employment depending on the former macroeconomic equilibrium.

There are three questions being answered here: the first two are answered well, however the last lacks any real depth. There is plenty to talk about when referencing increases in aggregate supply, so it was a shame to see this area neglected. I would've liked to have seen some discussion of the circular flow of income when talking about the multiplier effect, or some analysis of how it's derived to gain the higher marks.