[OmnipotentOmelette]

Here's a link on a presentation about this unit. Its got some good evaluation stuff... (WEESTEPS):
http://www.tutor2u.net/economics/pre...11/player.html

Another one...:
http://www.tutor2u.net/blog/index.ph...it-2-may-2011/

This is a thread I made the other day, asking about the 25 marker:
http://www.thestudentroom.co.uk/show...php?p=31608116

[OmnipotentOmelette]

Here is a model answer. I didn't write it- its copied and paste. I'm not sure its that good. I've got 5 more like this. SEE NEXT POST


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

A recession occurs when there is negative growth in the economy for two or more quarters. Governments have a range of policies it can use to help bring the economy out of recession. Demand side policies seek to boost aggregate demand and shift the AD curve to the right boosting spending, output employment and economic growth.

An example of a demand side policy could be a loosening of monetary policy which involves cutting interest rates. The idea being that lower interest rates encourage consumer and business borrowing, which boosts AD and spending throughout the economy. Also lower interest rates allow householders to make lower mortgage payments and the freed up capital can be used for spending in the economy. All of these generate positive multiplier effects and AD increases over time.

However, this policy might not work if consumer and business confidence is low. Rather than increase spending, householders, because they are worried about future jobs prospects might decide to save the extra money they have from reduced mortgage payments rather than spend it. If spending does not increase, then the economy will grow much slower.

Another policy could be to reduce income tax rates and boost government spending. This is called expansionary fiscal policy and is aimed at increasing spending in the economy. This could mean the government operating a budget deficit which is designed to inject money back into the economy and boost AD. Cutting income tax raises disposable income and the with the extra income consumers have, they start to spend in the economy. One of the benefits of increasing government spending is that it can be spent directly in the economy, on such things as road building programmes and schools and hospitals which have strong multiplier effects.

As above, if consumer confidence is low, the cuts in income tax might not lead to a boost to AD. Also if government spends more money, there are time lags between the decision to increased spending and the work starting in the economy. During this time, economic conditions might have changed and the impact of an increase in government spending might be limited. Another problem with cutting taxes and increasing government spending is the issue of running a budget deficit. This has to be repaid at some time and the interest payments on the deficit represent an opportunity cost to the government. Could the money have been put to better use in other parts of the economy?


As well as demand side policies to boost the economy, the government also focuses on supply side policies which are aimed at improving the output of goods and services in the economy. The aim of these policies is to make industry more efficient so that markets become more competitive and when the economy grows firms will be able to take advantage of increases in demand by selling output at competitive prices. Examples of such policies include education and training programmes aimed at making workers more productive, increasing competition between firms and cutting benefits to unemployed people to encourage them to take work. If these policies are successful, the AS curve will shift to the right and the economy will be able to produce more out at a lower inflation rate and achieve a higher rate of economic growth



There are issues with using supply side policies to help the economy come out of recession. One problem is that as firms seek to become more efficient, they lay off workers which lead to a rise in unemployment and a fall in consumer confidence. If this occurs, it might slow down the economy coming out of recession. Also supply side policies which focus on getting people back into work by cutting benefits could lead to a fall in AD in the economy. Most people on low incomes spends all of their benefits and do not save, so a cut in benefits could be seen as a fall in government spending and it could lead to negative multiplier effects occurring.

Another policy government might use is work with other economies to boost AD at an international level. If the UK major trading partners are also growing, then there should be an increase in demand for UK exports which will generate positive multiplier effects and create jobs in export industries. This creates stability at an international level and helps all economies come out of recession quicker. However, if these economies are in recession themselves, and are finding it difficult to grow, it becomes difficult for UK exporters to sell abroad and this could hinder economy recovery and sometimes make the recession worse if the economy has a large export sector.

Overall there are a range of policies which the government could use to bring the economy out of recession. Short run fiscal and monetary policies are designed to boost AD and long supply side policies are designed to boost AS. There are many factors which can influence the success of these policies, but successful policies focus on boosting short run AD and developing policies to make the economy more competitive in the long run as well.

[OmnipotentOmelette]

Model answers....
AS_Economics_Unit_2_June__2010_Investment.docx

AS_Economics_Unit_2_January_2010_Current_account_of_the_balance_of_payments.docx

AS_Economics_Unit_2_January_2010_Unemployment.docx

AS_Economics_Unit_2_January_2011_fiscal_policy.docx

AS_Economics_Unit_2_January_2011_spare_capacity.docx

AS_Economics_Unit_2_June__2010_Economic_recession.docx

Ten_ways_to_improve_your_evaluation_skills_and_marks_for_A2_economics.doc

[Plonk]

Any idea about what the 25 mark questions will be? I can't remember ever feeling so worried about an exam.

[bexstar6789]

I think that recession will come up in some form - this makes a good read giving some information on the recent recession and its causes as well as how different polies can help the economy to get out of reccession.
http://www.tutor2u.net/economics/pre...S1/player.html

Does anyone know what is likely to come up in tomorrows exam?

[Bright Lights]

How do interest rates influence exchange rates? Actually I know the how, but I don't know the why...?

Someone please explain.

Also, the exchange rate is my weakest subtopic, can someone aplain how it is linked with inflation also? Thanks

[Bright Lights]

I have a big issue with exchange rate. I know that higher interest rate = higher exchange rate but I can't explain why. Also, I can't explain anything about the exchange rate in general

Please help! Any websites or even better, your own explanation?

I think its the whole Balance of Payments subtopic that I struggle with to be honest

[Mr Inquisitive]

(Original post by Bright Lights)
I have a big issue with exchange rate. I know that higher interest rate = higher exchange rate but I can't explain why. Also, I can't explain anything about the exchange rate in general

Please help! Any websites or even better, your own explanation?

I think its the whole Balance of Payments subtopic that I struggle with to be honest

Increased incentive to save -> foreign businessmen will want to save in our banks for the favourable interest rates -> conversion of (for example) euros to pounds/increased purchase of pounds -> increased strength of pound and as such exchange rate.

(Feel free to correct me anyone )

[Bright Lights]

(Original post by Mr Inquisitive)
Increased incentive to save -> foreign businessmen will want to save in our banks for the favourable interest rates -> conversion of (for example) euros to pounds/increased purchase of pounds -> increased strength of pound and as such exchange rate.

(Feel free to correct me anyone )

This is the step I can't take in...
How would increased conversion from eg $ to £ strengthen/increase the value of the £?

There's probably some glaring fundamental concept I'm just not seeing

[Mr Inquisitive]

(Original post by Bright Lights)
This is the step I can't take in...
How would increased conversion from eg $ to £ strengthen/increase the value of the £?

There's probably some glaring fundamental concept I'm just not seeing

Simple concept of supply and demand can dictate: increase in demand raises price (in this case price of the pound, and therefore, value).

[rub em out]

(Original post by Bright Lights)
How do interest rates influence exchange rates? Actually I know the how, but I don't know the why...?

Someone please explain.

Also, the exchange rate is my weakest subtopic, can someone aplain how it is linked with inflation also? Thanks

investors look to invest their money in currency that yields the highest possible interest rate. If banks raise their interest rates it makes it more attractive for investors to buy £'s so demand for pounds will increase, pushing up the value of the pound. Similarly if rates fall the pound will devalue. This is all due to flows of 'hot money'

[grimshawwk]

Does anyone think it'd be possible if I start revising from now, carry on all through the night, to get another B like I did in unit 1? If so, how do you reckon I should go about it?

I know I'm an idiot for starting this late, but I've had so much revision for maths and other subjects that I just haven't had time - so please, only nice positive replies!

[Acerbic]

(Original post by Bright Lights)
How do interest rates influence exchange rates? Actually I know the how, but I don't know the why...?

Someone please explain.

Also, the exchange rate is my weakest subtopic, can someone aplain how it is linked with inflation also? Thanks

Hot money follows high interest: when the base rate rises, demand for the pound will rise, and so will its value. The converse is also true: when the base rate falls, money in international markets will flow toward currencies offering a better rate of interest, and the value of the pound will fall.

[smit.]

(Original post by grimshawwk)
Does anyone think it'd be possible if I start revising from now, carry on all through the night, to get another B like I did in unit 1? If so, how do you reckon I should go about it?

I know I'm an idiot for starting this late, but I've had so much revision for maths and other subjects that I just haven't had time - so please, only nice positive replies!

Grimshawwk:

if you're determined to revise tonight, then i guess thats the least u should do it would help defo! i know how it is doing loadsa exams at once (doing bio, chem,eco & maths myself), but you just have to be prepared and organised for them! what you sould do tonight for eco is, go through the objectives (stable low inflation, sustainable economic growth, high employment & a satisfactory balance of payment), revise AD and its components, revise AS (SRAS and LRAS) and also AS/AS diagrams at the very least to build on your knowledge in terms of analysis. Learn policies as well: Monetary, Fiscal & Supply side!!

once you've done that build on your evaluation skills- just think about the words "however", "but in the lond term", "this policy conflicts with..." etc, also learn definitions! and basically learn how to interpret data! and if God is on your side, then this revision should pay off, just shows that it's never too late to revise, don't forget to get rest after your exam. and if you're unlucky like me and you've got a chem exam after eco, then that's just luck my friend, that's life! Good luck anyway, you'll do good if you have the determination and motivation even at this late stage!

p.s. keep the coffee next to you

p.s.s don't make the same mistake in a2!

Good luck!

[grimshawwk]

(Original post by smit.)
Grimshawwk:

if you're determined to revise tonight, then i guess thats the least u should do it would help defo! i know how it is doing loadsa exams at once (doing bio, chem,eco & maths myself), but you just have to be prepared and organised for them! what you sould do tonight for eco is, go through the objectives (stable low inflation, sustainable economic growth, high employment & a satisfactory balance of payment), revise AD and its components, revise AS (SRAS and LRAS) and also AS/AS diagrams at the very least to build on your knowledge in terms of analysis. Learn policies as well: Monetary, Fiscal & Supply side!!

once you've done that build on your evaluation skills- just think about the words "however", "but in the lond term", "this policy conflicts with..." etc, also learn definitions! and basically learn how to interpret data! and if God is on your side, then this revision should pay off, just shows that it's never too late to revise, don't forget to get rest after your exam. and if you're unlucky like me and you've got a chem exam after eco, then that's just luck my friend, that's life! Good luck anyway, you'll do good if you have the determination and motivation even at this late stage!

p.s. keep the coffee next to you

p.s.s don't make the same mistake in a2!

Good luck!

Thank you so much! It's really nice to know that there are kind people out there who are willing to help people like me, even when I've been stupid and gone about it in completely the wrong way!

I shall do all of those things! What specifically should I concentrate on for each of them?

Thanks once again! You're a star!

[grimshawwk]

(Original post by smit.)

if you're unlucky like me and you've got a chem exam after eco

Good luck for your chemistry exam by the way! And of course your economics too - however you sound like a pro at this and I'm sure you will do brilliantly

[Alf123]

(Original post by OmnipotentOmelette)
Model answers....
AS_Economics_Unit_2_June__2010_Investment.docx

AS_Economics_Unit_2_January_2010_Current_account_of_the_balance_of_payments.docx

AS_Economics_Unit_2_January_2010_Unemployment.docx

AS_Economics_Unit_2_January_2011_fiscal_policy.docx

AS_Economics_Unit_2_January_2011_spare_capacity.docx

AS_Economics_Unit_2_June__2010_Economic_recession.docx

Ten_ways_to_improve_your_evaluation_skills_and_marks_for_A2_economics.doc

Hey where did you obtain these model answers from? I want to use them for unit 3 and 4 economics as well as unit 3 and 4 business if they are available?

I would very much appreciate it if you gave me the link of where you got these model answers from

P.S Have you got a model answer for inflation? Would be a great help thanks

Thank you

[JesusRevived]

like he said its just supply and demand for a currency demand=exports supply=imports

BOP is generally easy the question they will always ask is how to overcome a deficit or something.
Deficit could be caused by:
economic growth
uncompetitive to asia eg china
overalued currency

policies to use:
Devaluation selling pounds to lower vaule of currency to reduce AD
Judgement would be Marshall learner condition Trade off of poor economic growth
unemployment rise gov budget deficit cuts in spending increase in tax widen inequality

Increase interest rates slow down economy make less disposable income reduce AD blahblah blah

tarrifs and quotas and blablablabla CBB =]

[Prokopy]

Here we go...

[grimshawwk]

(Original post by Prokopy)
Here we go...

Just done an all-nighter in preparation... Could well fall asleep in the exam... Dropping off alrea...