Post Your Economics Question Here

Scroll to see replies

Can someone explain Q27 of this paper: http://www.xtremepapers.com/papers/CIE/Cambridge%20International%20A%20and%20AS%20Level/Economics%20(9708)/9708_w11_qp_12.pdf ?
Why is the correct option D rather than C?

Reply 2301

falcon pluse

Original post by mathflair

Because an increase in foreign assets will result in net investment income ( you may know it as net income flows ) for a country

Net income flows/investment income depending on which you know it as, is a component of the balance of payments current account.

For example, Apple owns a factory in China , this make profits and brings money in the UK. This flow of net income makes up the current account.

Reply 2302

falcon pluse

Looking at the european union , there is a lot of talk about monetary union. I'm a bit confused what does this mean who/how its implemented.

Does monetary union mean that the ECB control interest rates and dictates/ enforces fiscal rules. Or do they only control interest rates

confused!!

Reply 2303

hafsah1010

Could someone please tackle this Q for me, I'd really appreciate it!

To what extent do the benefits of high inflation in China outweigh the costs?

Reply 2304

throwdown1212

ediy

(edited 11 years ago)

Reply 2305

mathflair

Original post by falcon pluse

How come it's NOT C? Why isn't is necessary that foreign currency reserves pile up? I thought that always happens in case of a surplus.

Reply 2306

falcon pluse

Original post by mathflair

How come it's NOT C? Why isn't is necessary that foreign currency reserves pile up? I thought that always happens in case of a surplus.

Yes it may increase, but you could be in a deficit still , you wouldn't know. They key thing about it being D is the fact that from the word net , we can infer we have more assests abroad would generate more income.

Im only doing A level economics , but im pretty sure you can aquire foreign reserve by other means than just exports. It may increase due to a surplus , but the extent of its increase may have been due to other factors, whereas an increase in holding of foreign assests is diretly ( without a doubt) a component of the current account,

Reply 2307

JenniferASDJCVDG

Wondering if anyone can explain this section of the OCR A2 pre-release (extract 2) to me please?
"China's economy is unbalanced. Although investment is high, savings are higher still. The result is an economy driven by external rather than domestic deman, resulting in a large current account surplus."
I don't understand why excess savings leads to a large current account surplus. Is it because it means consumption is low so growth must be export-led? Or is it something to do with the excess savings being invested abroad and the returns on those savings benefitting the current account?
Thanks for any help :smile:

Reply 2308

SEM94

I'm having trouble understanding what a 'loss of exchange rate flexibility against other countries which have adopted the Euro' means when revising the disadvantages of joining a monetary union such as the Eurozone. Could anybody help me out? Thanks

Reply 2309

MeAndBubbles

Original post by hafsah1010

Could someone please tackle this Q for me, I'd really appreciate it!

To what extent do the benefits of high inflation in China outweigh the costs?

You'd have to bring up the subject of the Philips Curve, argue to what exent it's a valid theory, and if the costs are higher unemployment, are there other benefits for efficiency, the distribution of wealth effects, or growth in GDP. Firms might be willing to invest is they see higher prices.
That's all I can think of.

Reply 2310

Mouth

I was getting a little confused with this in class (and can't remember exact question) but can anyone give some help?

It was 'What are the macroeconomic effects of inaccurate measures of GDP growth'

So if GDP figure was lower than actual growth this would mean that....
Thanks for any help!

Reply 2311

Cozmo-Phoenix

Hey there everyone. I am a university student in the Philippines. I am currently studying AB Economics in the University of Santo Tomas. I just want to ask, what's the difference between AB Economics and BS Economics? Thanks for any help.

(edited 11 years ago)

Reply 2312

iMe

Original post by Cozmo-Phoenix

There isn't really much difference now. AB or BA is a Bachelor of Arts, whereas BS or BSc is a Bachelor of Science. Historically, BA was given to people doing arts and humanities, and BS was given to people doing sciences and maths, but over time the difference has narrowed. From what I've seen, the level of maths within an economics course may have some impact on whether it's classed as AB/BA or BS/BSc, though it's by no means universal and you need not be concerned whether or not your degree is awarded AB or BS. :smile:

Some say BS is harder. Some say it's not.

(edited 11 years ago)

Reply 2313

Hwee Ling

i am suck with these essays:

can i get some help/ have some discussion on these essay questions

1)Assess the extent to which a sharp depreciation of the pound will improve the UK current account of balance of payments. (12 marks)

2)Discuss the fiscal and supply side policies the UK Governemtn could persue to reduce the rate of unemployment. (30 marks!)

3)Using AD and AS analysis, explain the likely impact on the equilibrium price levele and level of real output in the UK of the "sharp increase in oil prices" (10 marks!)

Question. how would you guys write the essay to achieve the marks !!?

Best wishes.

Reply 2314

economicsjunkie

Hi guys can anyone help me with as level edexcel both unit 1 and 2 for bsd and econ revision notes....additional tips wld be much appreciated!!!

Reply 2315

PPF

Hi can anyone please explain to me how pension rights affect inequality in a country please.

many thanks

Reply 2316

quint101

Could someone please explain how a fixed exchange rate is maintained? Is it just via regulation, or are currency interventions via monetary policy, using central bank currency reserves also required? If the latter option is true, then what differentiates a fixed exchange rate system from that of a managed float? Could someone give examples of countries under a fixed exchange rate and managed float systems?
I’m currently going through my economics notes, and am uncertain about the main differences. For example, can we use a currency equalisation diagram (basically a buffer stack equivalent for currencies) to explain managed float of a fixed currency rate?

Thanks.

Reply 2317

MeAndBubbles

I'll answer part of your question.

It's not an edict or law, it requires us to sell foreign currency using the Echange Equalization Account or alternatively buy foreign currency with pounds if necessary to maintain the exchange rate of the pound in the foreign currency market.

This using of reserves is a change in monetary policy because reserves are part of the monetary base, and under fixed exchange rates as I have explained reserves change and there would be a multiplied affect on the money supply. You cannot control the money supply and have a fixed exchange rate, I have think. Altthough some of these theories have behavoural postulates behind them, always be aware of the assumptions of a model.

Reply 2318

MeAndBubbles

so the difference between the fixed and dirty float is:

the 'exchange market pressure' can come out in either the reserves or the exchange rate when it's a dirty float. If it's fixed it comes out in the reserves.

probably the main difference is there may be scope for independant monetary policy in a managed float