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

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If I just sat down and read/memorised everything in the Hodder education reference book, would that be better than doing past year papers? I think my mistake with paper 1 was that I relied too heavily on past year papers. The question on price mechanism shocked me a bit but I looked back and it was in the reference book.

For Unit 1, the practice paper they had at the back of the book was very similar to what actually came out (housing market), so my friend who studied that was able to do very well on the paper.

In the Unit 2 book, there's a lot on oil prices.
How would you guys explain the Marshall-Lerner condition?
Original post by officialjaayjaay
and quantitive easing!!!


You don't really need to know what a liquidity trap is
However it is when monetary policy does not work, meaning that interest rates are low, yet AD does not increase.

The MPC cannot boost AD any more, because interest rates are already at zero (or very near) and are ('trapped':wink:.

However Quantitative easing is an unconventional solution to this.
(edited 7 years ago)
Original post by officialjaayjaay
and quantitive easing!!!


Quantitative Easing occurs when Expansionary Monetary policy is used. Basically, this happens when the Central Bank prints money to purchase bonds from financial institutions (your commercial and retail banks/ high street banks etc). Therefore, this results in an increased availability of credit as these retail banks get more physical cash and in order to make a profit from all these extra cash, they will lower interest rates to attract people to take out loans. When they reduce their interest rates, there is more incentive for consumption and investment as the returns you get from saving is less. This results in people borrowing more and spending more, which boosts the economy.
Original post by AsmaaMahamud97
How would you guys explain the Marshall-Lerner condition?


Not needed for this specification
Original post by AsmaaMahamud97
How would you guys explain the Marshall-Lerner condition?


You don't need this. It's A2. But it's literally that in the short run, combined PED of imports and exports are inelastic so a devaluation of the currency will lead to a fall in revenue from net exports for the country.
(edited 7 years ago)
there was something for quantitive easing about mixing low interest rates and low consumer confidence, making interest rates lower makes it worse? So how does quantitive easing contribute?
Original post by amelienine
If I just sat down and read/memorised everything in the Hodder education reference book, would that be better than doing past year papers? I think my mistake with paper 1 was that I relied too heavily on past year papers. The question on price mechanism shocked me a bit but I looked back and it was in the reference book.

For Unit 1, the practice paper they had at the back of the book was very similar to what actually came out (housing market), so my friend who studied that was able to do very well on the paper.

In the Unit 2 book, there's a lot on oil prices.


I think I had the same problem, but the past papers helped a lot with the XED question. It's about finding a good balance.

Is it about benign deflation and how deflation is pretty harmless compared to inflation?
This is one of the most productive threads I've ever been on, great job guys! We're gonna smash this exam to pieces tomorrow :smile:
Original post by harryleavey
Not needed for this specification


But I think it's very relevant to the spec, so why not?
Original post by AsmaaMahamud97
But I think it's very relevant to the spec, so why not?


Make sure you study it well though, because this is quite a tricky concept. Explaining it wrongly will cost you more than not explaining it.
Original post by rosemondtan
You don't need this. It's A2. But it's literally that in the short run, combined PED of imports and exports are inelastic so a devaluation of the currency will lead to a fall in revenue from net exports for the country.


Thnxx
guys watch pajholden on youtube, his videos are siiiick for explaining complicated topics
Original post by AsmaaMahamud97
But I think it's very relevant to the spec, so why not?


I think that a lot of things are relevant to the specification. But I don't learn them just because they should be on the spec.

The specification has been created for a reason.

If you want to learn something that is not required, and will not be rewarded - that is your choice. But please ask it to a thread where others would benefit i.e an exam board which includes the Marshall Lerner condition
(edited 7 years ago)
Original post by officialjaayjaay
and quantitive easing!!!


Lets say interest rates fail to stimulate AD.

QE may be introduced instead (or in addition).

1.

The central Bank buys financial assets (such as government bonds)

2.

They do this by 'Printing money' - they just create more money electronically and use this new money to buy the assets.

3.

As a result the owners of these financial assets have more cash

4.

These owners are financial institutions, commercial banks...

5.

If they have more money, they are more willing to lend. So consumers can more easily gain access to credit. Therefore consumption increases and AD increases.

6.

As a result of the Bank of England purchasing these financial assets. The demand for the assets increases. This causes the price to rise. Therefore the yield on these assets falls. This creates an incentive for the sellers of these assets to purchase other assets, such as government bonds or company shares.

what calculations are we going to need to be able to do/ what might they ask?
also does anyone have a list of good evaluative statements?
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Original post by Diastal
What's the best way of answering the questions? I usually start from section B and then I usually end up with having about 10-15mins on section A. Does anyone have a better way of going through the exam?


I think do section A because it wakes up your knowledge, do the 4 mark question and I'd say go for the 20 mark question afterwards because then you can read the extract properly and get in done properly, so when you do your 15 and 10 markers you know where to look in the extract for backing up your points. I'm following this for sure as I ran out of time while doing the 20 in unit 1 which might've cost me a grade
Original post by harryleavey
I think that a lot of things are relevant to the specification. But I don't learn them just because they should be on the spec.

The specification has been created for a reason.

If you want to learn something that is not required, and will not be rewarded - that is your choice. But please ask it to a thread where others would benefit i.e an exam board which includes the Marshall Lerner condition


You're aware that the mark scheme only contains indicative content for the longer mark questions, right?
So I'm pretty sure it would be rewarded, especially since it's related to PED, which would be in the mark scheme.
But thanks anyway.
why does supply side policies cause growth without inflation?

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