Edexcel economics unit 1 and 2 retakes

Oh yeah, the question was asking why wage rates may have been low during that time. I spoke about the financial credit crunch in late 08, and companies losing profits/revenue and this may cause people to lose their jobs or accept lower wage rates etc. And then I spoke about increased immigration (as there was data given) and its effects on the supply of labour. It would likely increase the supply of labour and reduce wages as its more competitive. I also mentioned that typically Eastern European workers work for less, and that this might drive down wages.

What did everyone write for 30 marker Q2 ??

Consumers:
Interest Rates go up:
- Marginal prop. to save increases, marginal prop. to consume decreases
- Less incentivised to borrow/finance things

Interest rates go down:
- MPC increases and surpasses MPS
- More willing to finance purchases with loans as rates are favourable
- More consumption pushes AD curve upwards

Credit:
- Banks make more money when there's a gap between what they get from gov. bonds and the rate they lend at
- More robust credit markets lead to more efficient allocation of resources
- Interest rates determine can determine the level of credit available

Firms:
Interest rates go up:
- Less reason to borrow, more reason to re-invest cash into capital goods
- Leases and other credit based lines increases the cost of production
- Less incentive to hire as there's an overall lack of demand push

Interest rates go down:
- More willing to issue bonds/borrow money to invest into production
- Less reason to keep cash on the balance sheet/in savings
- Greater demand push from consumers spending more and borrowing to spend more
- Expansion in AS curve as AD rises

Eval:
- L/R vs S/R
- Time lag between announcement of interest rate changes and when effects take place
- Magnitude of change in interest rates and the subsequent effects of that
- Overall, monetary policy is effective but has its draw banks and needs supplementary policies to achieve econ. goals.




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Do you think writing about Quantitative Easing would get me some marks :-o

Yeah, I wrote about falling AD, wondering if an increase in immigration is a valid point because it decreases wages

This is exactly what I wrote

What did you write about for that 8 marker that asked about falling real wages

i spoke about the recession for my first point and low levels of productivity for the other :/ not sure this was right tho (

Yeah I spoke about the recession as well, so I wrote that since there is a recession consumption has decreased, so firms make less profits. So in order to them to increase profits, they reduce their costs by cutting wages.

I then talked about how unemployment may be causing the negative real wage growth, I said that since there is unemployment the net spending on wages in the economy has decreased, thus the real wage growth is negative. I also used a reference from figure 2 for this point.

would increased levels of employment be an impact on a weaker exchange rate?? i mentioned this and a positive net exports as my points for the 8marker but i don't think i'll get any credit for the point on employment :/ should have mentions inflation arghh

if you mentioned in the "export industry" then you will pick up marks. safest way was to go with increased exports and cost push inflation as the two points