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AQA economics unit 2 27/05/2011

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Is there any adivce anyone could please offer on how to structure the d) questions , i'm good with all the knowledge but then i sometimes see a question and i just don't know how to apply it :frown:

For example: assess the importance of both demand side and supply side policies in helping the uk economy to achieve a prolonged period of economic growth?

How could i go about that ?

Thanks in advance :smile:

Ok first it would be best to define economic growth, supply side polices and demand side polices for the introduction.

Economic growth is a rightward shift in the lras, so you need to talk about supply side polices, You can talk about creating extra competetion, prvitisation, deregualtion of markets, this should lower average costs, break up monopolies, and allow less effiecint firms to enter the market, You can aslo include diagrams here. These should also lower inflation and increase employment. If the labour productivity increases, you can also talk about higher export sales, leading to a better balance in payments position. You could talk about education and training if there is currently sturctural unemploment.

Then you can talk about demand side polices, should as fiscal and monetary measues, to increase demand via lower tax and interest rates, as investment is dependednt on demand, lower tax and interest rates should boost demand.

Then you can evualate. In this question, you could talk about what the problems may be and how to solve them. E.g no point boosting demand if structural lunemployment is the case. Or no point training you workforce if there is demand defieict. You could comment on possible conflicts. You could also comment on the multiplier/ acclerater processes. Which show economics growth. Be concise and specfic, and define all the fancy words you say and use diagrams

Hope this helps, if there is anything anyone else would like to add, or improve them please do. I more than happy to answer any other questions has it enhances my learning to, and helps yours.

Reply 21

sandy21

could anyone explain to me a bit about the multiplier effect. im having trouble revising that, and dont understand it whatsoever|:

thanks (:

Reply 22

rub em out

Original post by sandy21

could anyone explain to me a bit about the multiplier effect. im having trouble revising that, and dont understand it whatsoever|:

thanks (:

basically its where the initial spending of money in an economy be it government spending or consumer spending has a larger effect on national income.
This happens because the initial spending is income to another person which causes them to spend a proportion of this money themselves which is passed on to another person and so on..

Reply 23

Acerbic

Be optimistic: for the January 2011 paper, 65/75 marks was full ums.

Reply 24

Eclair

Original post by tallysingh

Ok first it would be best to define economic growth, supply side polices and demand side polices for the introduction.

Economic growth is a rightward shift in the lras

Original post by tallysingh

, so you need to talk about supply side polices, You can talk about creating extra competetion, prvitisation, deregualtion of markets, this should lower average costs, break up monopolies, and allow less effiecint firms to enter the market, You can aslo include diagrams here. These should also lower inflation and increase employment. If the labour productivity increases, you can also talk about higher export sales, leading to a better balance in payments position. You could talk about education and training if there is currently sturctural unemploment.

although correct, 80% of this is microeconomics. supply side policies in macro are training, education, reducing government spending, cutting corporation taxes and income tax. try to think about people and firms as a whole rather than individual firms and their individual costs. the last two sentences are bang on, though.

Original post by tallysingh

Then you can talk about demand side polices, should as fiscal and monetary measues, to increase demand via lower tax and interest rates, as investment is dependednt on demand, lower tax and interest rates should boost demand.

make sure you mean lower taxes on individuals (fiscal) and not firms (supply side)

Original post by tallysingh

Then you can evualate. In this question, you could talk about what the problems may be and how to solve them. E.g no point boosting demand if structural lunemployment is the case. Or no point training you workforce if there is demand defieict. You could comment on possible conflicts. You could also comment on the multiplier/ acclerater processes. Which show economics growth. Be concise and specfic, and define all the fancy words you say and use diagrams

diagrams for supply side = SRAS shifting to the right/downwards
diagrams for demand side = AD shifting the the right

other evaluation points: TIME LAGS, ELASTICITIES OF UNSHIFTED CURVE, MAGNITUDE OF SHIFT, UNINTENDED CONSEQUENCES

Original post by tallysingh

Hope this helps, if there is anything anyone else would like to add, or improve them please do. I more than happy to answer any other questions has it enhances my learning to, and helps yours.

just adding stuff xD

Reply 25

tehforum

Thanks Eclair - I may nom one of those to cry myself to sleep after stats tomorrow.

:geek:

Reply 26

horn-e

I'd quite like a question focused on government spending. My teacher seems fairly certain a question focussing on recession and measures the government can take to avoid it or help the economy get out of it will come up. Judging by the last batch of papers (supposedly they are written in groups, so this upcoming paper was written back in 2009 along with the January 2011 paper) they were written at the very start of the recession, so when this exam was written, it would be bang smack in the middle. It would also have been written around the time when Alastair Darling slashed VAT so a question regarding the effects of government spending on AD could be a possibility (eg. multiplier effect of VAT reduction).

I suppose its better to just rule out the most recent questions (January 2011) and just accept that they could throw anything at us... simply to avoid getting into a situation where you focus on a particular subject, ignoring the rest and then find that it doesn't come up in the paper!

Reply 27

tallysingh

Original post by horn-e

what ever comes up, everything is linked so you need to have a good understanding of every topic and see how changes in them effect each other. Every past paper i have done, i have always included the multiplier process.

Reply 28

tallysingh

Original post by Eclair

this definition wouldn't be enough. the specification requires you to know that economic growth can be both long run and short run. long run or trend economic growth is, as you specified, a rightward shift of the LRAS or a rightward shift of the PPF. short run or real economic growth is shown with a positive output gap, a shift in either the AD or SRAS curve or a movement within or outside the PPF.

although correct, 80% of this is microeconomics. supply side policies in macro are training, education, reducing government spending, cutting corporation taxes and income tax. try to think about people and firms as a whole rather than individual firms and their individual costs. the last two sentences are bang on, though.

make sure you mean lower taxes on individuals (fiscal) and not firms (supply side)

diagrams for supply side = SRAS shifting to the right/downwards
diagrams for demand side = AD shifting the the right

other evaluation points: TIME LAGS, ELASTICITIES OF UNSHIFTED CURVE, MAGNITUDE OF SHIFT, UNINTENDED CONSEQUENCES

just adding stuff xD

yes thank you, your points are 100% valid.

Reply 29

gamblix

Unit 2: The National Economy (ECON2) – Essay Questions:

Old Specification Style Questions:

January 2006:

• Using the data and your economic knowledge, evaluate the impact which ‘a series of increases in oil prices’ (Extract C, lines 5 and 6) might have on the performance of economies such as the UK. (15 marks)

• Using the data and your economic knowledge, evaluate the significance of increasing levels of consumer borrowing for UK macroeconomic performance. (15 marks)

Summer 2006:

• Using the data and your economic knowledge, evaluate the effects on the UK trade balance in goods and services of ‘further improvements to the supply side of the economy’ (Extract B, lines 12–13). (15 marks)

• Using the data and your economic knowledge, evaluate the extent to which changes in costs explain the trends in UK inflation in recent years. (15 marks)

January 2007:

• Using the data and your economic knowledge, evaluate the importance to UK macroeconomic performance of increases in income per head of the population. (15 marks)

• Using the data and your economic knowledge, evaluate the importance of managing aggregate demand to bring about a sustained reduction in the rate of unemployment in the UK economy. (15 marks)

Summer 2007:

• Using the data and your economic knowledge, evaluate the importance of rising productivity in bringing about an improvement in the UK balance of payments on current account. (15 marks)

• Using the data and your economic knowledge, evaluate the contribution that the growth of government expenditure may make to UK economic performance. (15 marks)

January 2008:

• Using the data and your economic knowledge, evaluate the extent to which the events outlined in Extract B (increased interest rates) might have affected UK macroeconomic performance. (15 marks)

• Using the data and your economic knowledge, evaluate the possible consequences for UK macroeconomic performance if the euro area and the US seek to reduce their balance of payments deficits on current account. (15 marks)

Summer 2008:

• ‘When the US sneezes, the world catches a cold’ (Extract B, line 5). Using the data and your economic knowledge, evaluate the possible economic consequences for UK macroeconomic performance of a slowdown in the US economy. (15 marks)

• ‘Improvement in our external performance continues to be difficult to achieve’ (Extract D, line 21). Using the data and your economic knowledge, evaluate the government policies which might improve the UK balance of trade in goods and services. (15 marks)

New Specification Style Questions:

January 2009:

• Using the data and your economic knowledge, assess the importance of higher labour productivity in bringing about improvements to UK macroeconomic performance. (25 marks)

• Extract F (lines 7-8) argues that ‘the potential significance of household savings for UK macroeconomic performance needs to be recognised’. Using the data and your economic knowledge, evaluate the significance of household savings for UK macroeconomic performance. (25 marks)

Summer 2009:

• Extract B (lines 12 – 14) states; ‘When total spending grows more than the volume of output produced, inflation is the result’. Assess the view that inflation is always caused by an increase in aggregate demand (25 marks)

• Extract F (lines 2 – 3) state that ‘the level of consumption is generally a god indicator of the strength of the economy’. Assess the view that rising consumer expenditure is always beneficial for an economy (25 marks)

January 2010:

• Assess the view that a fall in the exchange rate of the pound will help to improve the performance of the UK economy. (25 marks)

• Extract F (lines 10-12) states: ‘A significant increase in unemployment seems inevitable and, in the short run, there is not much that a government can do about it.’ Evaluate alternative measures which can be used to reduce unemployment. (25 marks)

Summer 2010:

• Extract C (lines 4-5) indicates that .investment is expected to fall rapidly in 2009. Assess the consequences for the UK economy of a significant fall in investment spending. (25 marks)

• Assess the various policies that could be used to help an economy, such as that of the UK, to recover from recession. (25 marks)

here all of the questions :smile:

does anyone think they can predict the questions?

(edited 12 years ago)

Reply 30

gamblix

oh i almost forgot 2011
January 2011:

• Extract B (lines 7 – 8) states that ‘the answer to increasing the long-run trend rate of economic growth is not simply one of increasing spending’. Using the data and your economic knowledge, assess the importance of both demand-side and supply-side policies in helping the UK economy to achieve a prolonged period of economic growth. (25 marks)

• Extract E (lines 1 – 2) states: ‘The overriding objective of economic policy is to maintain a stable economy. This requires low inflation, low unemployment and a steady rate of economic growth.’ Using the data and your knowledge of recent economic events, assess the contribution that fiscal and monetary policies can make in maintaining a stable economy. (25 marks)

Reply 31

Jim Riley

I recommend everyone taking AS Economics Unit 2 (all boards) read this before tomorrow

http://www.tutor2u.net/blog/index.php/economics/comments/macro-revision-putting-things-in-context/

Jim

Reply 32

lucky

could someone tell me what diagrams need to be used.. for example a)unemployment
b)inrest rates .. ect ??

Reply 33

rub em out

Original post by lucky

could someone tell me what diagrams need to be used.. for example a)unemployment
b)inrest rates .. ect ??

unemployment: -classical unemployment diagram (wage price above equilibrium)
-inward shift in AD to show cyclical UE

Interest rates:again just increased AD if IRS reduced and possibly inward shift in AS in SR due to increased import prices

Reply 34

ohTS

soo.. does anyone fancy giving an outline of what the answers should look like, like someone did for unit 1? i'm having a bit of a breakdown :afraid:

Reply 35

alittlehelp

should have prepared better for this!

I want to cry

does an increase in imports, then increase AD?

Reply 38

somebodytoldmexo

Original post by browney18

does an increase in imports, then increase AD?

no, it decreases AD

AD = C + I + G + (X - M)

the higher (X - M) is, generally speaking, the higher AD will be

so if imports (M) increase, ceteris paribus, (X - M) will decrease

Reply 39

alittlehelp

could someone tell me the macroeconomic indicators quickly? i know gdp and the cpi and rpi are but are the claimant count and jobseekers allowance examples? and also the balance of payments?