The slow transition towards sustainable energy systems has sparked debate over public and private investment in green technology. Governments are using tax credits and subsidies to encourage private ventures in wind, solar, and battery storage infrastructure. While some policy makers argue that direct government funding is needed to accelerate these projects, others worry about the fiscal implications, such as rising national debt or the need for tax hikes.
Investing in green technology is expected to trigger a multiplier effect (Extract F, line 8) that stimulates economic activity across multiple sectors. This investment not only expands capacity and lowers long-run marginal costs but also boosts aggregate demand in the short run during the construction of these facilities. However, critics argue that the initial capital flight to import specialized equipment could worsen the current account deficit before domestic supply chains adjust.
Define the term 'multiplier effect' as referenced in Extract F.
222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.