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

What I wrote for the 15 marker was that the MPC should be worried about deflation. Firstly I said that inflation is at the lowest it has ever been and said that they should look at using the expansionary MPC because the economy is really close to falling into deflation. Evaluated that by saying that interest rates are already low but inflation is still low, meaning that manipulating interest rates to change inflation is uneffective and they should use quantitative easing instead. Also I mentioned that it is a worrying factor because there are no certain tools which the MPC can use to get out of deflation and mentioned that we can become like Japan. Saying that deflation is bad because people are constantly not going to consume because they will know that prices are always falling they'll keep on waiting till it gets low instead of purchasing now, hence a negative impact on AD occurs

I wrote about firms confidence being low due to the low prices of oil so they had limited expectations and then i talked about the pound appreciating meaning left shift in AD

Exactly what I wrote phew. I think I coulda mentioned that it may be benign deflation but I evaluated saying that the oil price fall would eventually lead to inflation so it may deflect the prospect of deflation.

By the way how can someone write 5 marks worth on what real income is. All I could do was define it and write how it rose and fell with some figures. D:

Define real - K
Define income - K
Throw in some figures - 2AP
Explain what the figures show i.e.less real income over time - AN

Define real - K
Define income - K
Throw in some figures - 2AP
Explain what the figures show i.e.less real income over time - AN

Lol. I only wrote one paragraph for it including all of that, dunno why they gave us a whole page.

Wait, income is a flow, right?
Were we supposed to identify peak/lowest? Give a range?

What did you write for the 20 marker!

By the way, the question about the chancellor of the exchequer or whatever tf it was, was the question about the increase in income? So you would find the multiplier, multiply the injection by this number then subtract the initial injection?

By the way, the question about the chancellor of the exchequer or whatever tf it was, was the question about the increase in income? So you would find the multiplier, multiply the injection by this number then subtract the initial injection?

I think so, but it said the increase in income from the injection so i thought I'd include it.

Never mind, I think you're correct, because I got 30bn then subtracted 15bn from it, because I thought it was asking the increase in income due to the injection; but in hindsight I'm pretty sure I should've just left it at 30bn. :I

By the way, the question about the chancellor of the exchequer or whatever tf it was, was the question about the increase in income? So you would find the multiplier, multiply the injection by this number then subtract the initial injection?

Are you talking about the 15 billion injection in section A? I got 30 billion as my final answer because mpc = 0.5 so the multiplier = 1/1-0.5 = 2. So 2*15billion