Edexcel AS Economics (New Spec) Unit 2 - 23rd May 2016

How would the UK current account improve in the near future? It's currently at a trade deficit.

Reply 121

https://www.youtube.com/watch?v=abVrZXjJH0Y

Original post by applebanana123

Does anyone have like a list of UK government policies/economy statistics to use as application, other than the basic ones such as the current rate of inflation/economic growth/etc.?
Seems pretty difficult to find 6 marks worth of application if the question is on effectiveness of fiscal policy/macroeconomic objectives.
Also, what's the definition of a macroeconomic objective?

Reply 122

Original post by amelienine

How would the UK current account improve in the near future? It's currently at a trade deficit.

It is unlikely anything will improve in the near future. The current account deficit is not a problem, as long as the government can finance the deficit. In the case of the UK, the government is credit worthy, so can easily finance the deficit.

However a current account deficit may be a problem, as it shows that a country is not 'paying it's way'. Can lead to long term decline of the export sector as the whole economy is based on imports.

If the Government decided that it was a priority to improve the current account deficit they could:

•

Monetary policy to change interest rates. i.e Lowering interest rates would reduce hot money (foreign saving money in UK banks). This would reduce demand for the pound. Causing depreciation. This would make imports more expensive, improving the current account balance.

•

Policies to reduce price level (e.g contractionary fiscal or contractionary monetary) hence making exports cheaper and more competitive. Increased exports improve current account balance.

•

Tariffs on Imports to reduce demand for imports

•

Improve exports: e.g customer service, high quality goods, unique products... All of which would make exports more competitive, improving current account balance. Germany is an example of a country with a current account surplus as a result of non-price factors

(edited 7 years ago)

Reply 123

Original post by harryleavey

It is unlikely anything will improve in the near future. The current account deficit is not a problem, as long as the government can finance the deficit. In the case of the UK, the government is credit worthy, so can easily finance the deficit.

However a current account deficit may be a problem, as it shows that a country is not 'paying it's way'. Can lead to long term decline of the export sector as the whole economy is based on imports.

If the Government decided that it was a priority to improve the current account deficit they could:

•

Monetary policy to change interest rates. i.e Lowering interest rates would reduce hot money (foreign saving money in UK banks). This would reduce demand for the pound. Causing depreciation. This would make imports more expensive, improving the current account balance.

•

Policies to reduce price level (e.g contractionary fiscal or contractionary monetary) hence making exports cheaper and more competitive. Increased exports improve current account balance.

•

Tariffs on Imports to reduce demand for imports

•

Improve exports: e.g customer service, high quality goods, unique products... All of which would make exports more competitive, improving current account balance. Germany is an example of a country with a current account surplus as a result of non-price factors

Thank you for the answer, one more thing, what do you mean when you say that the government is credit worthy?

Reply 124

Original post by amelienine

Thank you for the answer, one more thing, what do you mean when you say that the government is credit worthy?

http://www.tradingeconomics.com/united-kingdom/rating

Can the economy borrow easily to finance the imports?
It is the same as if a citizen wants to borrow some money to finance the purchase of a good. They will not be able to borrow if they have a poor credit rating.

UK government has an AAA credit rating. (the best)
Although it is worsening... (I think the US has the best rating?)

(edited 7 years ago)

Reply 125

Original post by harryleavey

http://www.tradingeconomics.com/united-kingdom/rating

Can the economy borrow easily to finance the imports?
It is the same as if a citizen wants to borrow some money to finance the purchase of a good. They will not be able to borrow if they have a poor credit rating.

UK government has an AAA credit rating. (the best)

Okay, thank you!

Reply 126

Original post by amelienine

ImageUploadedByStudent Room1463904267.743352.jpg

How would you calculate the change in unemployment over the period shown?

Posted from TSR Mobile

I literally have no idea with this one. I fully understand the cumulative part. I am not getting 600,000 (The answer in the book).

Sorry

Reply 127

Original post by harryleavey

I literally have no idea with this one. I fully understand the cumulative part. I am not getting 600,000 (The answer in the book).

Sorry

Sorry, meant a change in * employment.

Yeah, I don't understand how the book got 600,000 either.

Reply 128

Are government policies the same as macroeconomic objectives?

Reply 129

Original post by amelienine

Are government policies the same as macroeconomic objectives?

Nope, but they are related.
Macro Objectives:

•

Trade performance (current account)

•

Stable inflation (2%)

•

Economic growth

•

Employment

•

Redistribution of Income

•

Environment

•

Budget balanced

Government policies aim to meet these macro objectives:

•

Monetary Policy e.g to achieve stable inflation

•

Fiscal Policy e.g to Balance budget

•

Supply Side Policy e.g to achieve employment

(edited 7 years ago)

Reply 130

Diastal

6

What is the formula used to calculate real gdp?

Reply 131

Original post by Diastal

What is the formula used to calculate real gdp?

(Nominal GDP / CPI inflation(index) ) * 100

Here is a question for you:

Calculate the real GDP for 2009 and 2010. Has Real GDP increased or decreased?

screen_shot_2015-12-05_at_134158-151726124A006693018-thumb400.png

screen_shot_2015-12-05_at_134158-151726124A006693018-thumb400.png

Spoiler

(edited 7 years ago)

Reply 132

Hot&SpicyChicken

3

Original post by harryleavey

(Nominal GDP / CPI inflation(index) ) * 100

Here is a question for you:

Calculate the real GDP for 2009 and 2010. Has Real GDP increased or decreased?

screen_shot_2015-12-05_at_134158-151726124A006693018-thumb400.png

Spoiler

We dont need to know that

Reply 133

Hot&SpicyChicken

3

Original post by Hot&SpicyChicken

We dont need to know that

Real GDP increased from 83.33% to 86.67%

Reply 134

Screen Shot 2016-05-21 at 11.51.59.png13.3KB

Original post by Hot&SpicyChicken

We dont need to know that

Yes we do. Take a look at the specification: page 12
http://qualifications.pearson.com/content/dam/pdf/A%20Level/economics-a/2015/specification-and-sample-assessment-materials/PearsonEdexcel-AS-EconomicsA-AccreditedSpec-August14.pdf

a) Rates of change of real GDP as a measure of economic growth

Ignore the attached image

(edited 7 years ago)

Reply 135

rosemondtan

OP

10

Original post by harryleavey

http://www.tradingeconomics.com/united-kingdom/rating

Can the economy borrow easily to finance the imports?
It is the same as if a citizen wants to borrow some money to finance the purchase of a good. They will not be able to borrow if they have a poor credit rating.

UK government has an AAA credit rating. (the best)
Although it is worsening... (I think the US has the best rating?)

Nope, quite sure the S&P rating for the US has gone down to AA+

Reply 136