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Discuss whether the links between developing and developed economies have always promoted development. (15)

Yes because:
- Opportunities of export promote production and increase in the quality of products: explain how, give examples.
- More incentive for development and efficiency in the long run: explain why,
- If the links consist of FDI flows into developing coutries it increases employment in the short and long run, decreases BofP deficit in the long run, increases the level of personal development due to training provided etc.

No because:
- Developed countries often take advantage of small producers in developing countries, and set the price below the cost of production. That messes with people's incomes - instability. Examples: cocoa from Brazil etc.
- FDI might create competition for the domesic producers and force them out of the market: e.g. production of clothes etc. in a developing country will destroy local inefficient manufacturers who can't finance investment in technology.

Reply 61

coolspice

Helo can someone tell me where i could get GCE A/S ECONOMICS marking schmes from.. Any sites would be cool..
Thanks looking forward for a reply

Reply 62

tanusha-tomsk

You can get some past papers from the Edexcel website, scroll down to examiners report. They are really useful! This is the link for it:
http://www.edexcel.org.uk/quals/gce/economics/adv/9121/
I hope the one you are looking for is there! These come in as a pack: paper + mark scheme, I think.

If you are looking for AQA or OCR papers or whatever other board, google the board, there must be some papers there as well.

Reply 63

chazmeister007

European Integration will continue to stall and may even unravel, unless a federal institutional approach replaces the current inter-governmental institutional approach, discuss

Your thoughts and explanations are very welcome!!

Chazmeister007

Reply 64

tanusha-tomsk

chazmeister007

European Integration will continue to stall and may even unravel, unless a federal institutional approach replaces the current inter-governmental institutional approach, discuss.

^ Just wondering, is it a Economics question? I've never seen a question of this type. What board do you do?

EDIT: God, just read the question again and it turned out that I have been answering a different one :redface:

What do you mean by inter-governmental institutional approach? Surely CEB works across the Europe and individual countries have no say in it? Is this approach really what is in place today? Here are the problem associated with the current EU approach:

Well, [current] approach does have many disadvantages. The countries within EU have very different economies historically, Germany is a heavily secondary sector country, while France is more agriculural, they are both protectionist because they want to support their industries. Lithuania and Estonia and other Eastern Europe countries need a lot more money and concessions to reach the economic standards of Western Europe, and instead of building up their economies, the natives immigrate to Germany to find decent high salary jobs, causing an increase in unemployment that is massive anyway. These are just some of the problems.

If we are talking in terms of the economy, I think having ECB (European Central Bank) and the same monetary policy (interest rates) across Europe has many complications. Rate of growth of AD (C+I+G+X-M) are different, e.g. a lot lower in Eastern Europe because the incomes are generally lower. High rates to depress high demand in Germany means lowering inflation by far in Poland, and whilst in the long run most countries will adapt to common interest rates, they are problematical at the moment. General rate of inflation is not to exceed 2% as measured by CPI.

Euro exchange rate (does anyone know whether it is fixed, adjustable peg or floating??) agains other currencies also has limitations, mainly to do with the BofP. Low exchange rate is good to repair a deficit on the C/A, according to Marshall-Learner theory, given that elasticities of S and D are the same. However, the size of deficit that determines just how high or low the exchange rate should be, varies across the Europe. It wasn't doing Germany any favours because it had a practically uncontrollable deficit, both on C/A and a budget deficit, and as part of the new policy Angela Mercel (German Chancellor since December) has put up taxes and in particular VAT (from 16% to 19%).

Having common external tariff and no internal tariffs or quotas has also proven to be problematical. Some countries can not compete with newly industrialised countries, and while it's al right for the UK which has a head position in the perceived quality, many countries can not keep up. That means their goods are uncompetitive both whithin and outside of EU and if it wasn't for the EU, the country would have put up more tariffs.

As I said, some countries need to be more protectionist and they don't want cheap labour coming in. However, the UK (which concentrates on turtiary sector) need people to fill in the job positions. The economy would crash if the flow of foreigners in the country was limited. Recently (3rd of April) the Home Office worked out a new law that makes it a lot more difficult for people from outside of EU to come in (I only know because it concerned me grrr), and the only reason for that was that it had to be in line with general EU regulations.

Reply 65

iva

Hey, I am doing my revision and I have certain very specific questions in Unit 1, Edexcel:P

a) Can we have an inward shift of the PPF? Does this mean negative economic growth which is presented as a move in the business cycle downwards?

b) Under what circumstances will the PPF NOT be concave? (i.e bending towards the origin)

c) Subsidies lower the cost of production. Yet the new equilibrium price is not the subsidy amount because 'some it is pass to the producer as higher cost of production due to higher output'! can you please explain me this (esp. the one in quotation)

any help appreciated. thnx a lot! :tongue:

Reply 66

tanusha-tomsk

For question C: have a look at this diagram. If we forget about the Demand curve for a moment, we can see that the price goes down from P1 to P3 (the red arrow) when the subsidy is granted. However, if we consider the demand curve as well, we can place equilibrium on point C, this is where Demand and supply meet. While with subsidy the firm can produce Q1 at price P3, it can produce Q2 only at price P2 - the new equilibrium price. This is what your quote says - higher output (between Q1 and Q2) costs the firm extra funds (between P3 and P2) to produce. If it is still unclear, look at the diagram and try to work out different price- quantity combinations...

UNIT1.bmp475.0KB

Reply 67

iva

tanusha-tomsk

thnx very much... It is much more clear now! :tongue:

so the higher costs are due to the higher output (Q2) that it is produced in order to meet an equilibrium at C. Thnks. (please correct me if I am wrong (just double checking)

Reply 68

.M.

Hey i was wondering about this question:
Use PPF diagrams to explain the differences between actual output and potential output and between economic growth and economic development?

Thanks

Reply 69

.M.

Thanks! i really appreciate it .. I will work on that.! :smile:

Reply 70

tanusha-tomsk

iva

thnx very much... It is much more clear now! :tongue:

so the higher costs are due to the higher output (Q2) that it is produced in order to meet an equilibrium at C. Thnks. (please correct me if I am wrong (just double checking)

Yep that's right. You know this now :smile:

You are welcome :smile:

Reply 71

ash213

hey omg i really hope u can help, im having trouble with these 2 unit 6 questions. please can u help me out with these edexcel specimen questions

a) in 2002, the unemployment rates in spain, france and italy were significantly higher than in the uk. examine the factors which might explain why the uk's unemployment rate was lower than these countries. (40)

and

(b) to what extent might the pursuit of full employment conflict with other economic objectives?
(60)

im having trouble coming up with points and counter argiung these points, and also coming to conclusions.
pllleasse can u help , o' economics master!

Reply 72

Lemonsoul

Have a question about exchange rates. 'Represent graphically the effect of an increase in the money supply on UK exchange rates'. I figure that demand for imports will rise along with demand for domestic goods, so demand for foreign currencies will increase. Should I draw a demand/supply graph for pounds and show a rightwards shift in the supply curve or should I draw a graph for foreign currencies and show a rightwards shift in the demand curve? Either way the value of the pound has effectively decreased right?

Reply 73

Lemonsoul

Cheers. By derived demand do you mean that in order for Brits to import more goods they must put more money into the exchange market first, right? Its not a term I've come across before.

Reply 74

ash213

can u help me wit these questions

a)to what extent are trade deficits a cause for concern? (10)

b)evaluate two policies wich the UK government might use to increase the competitiveness of the country's goods? (10)

ppplllleaaaseee heelllp!! been stuck for ages

Reply 75

chazzinio

ash213

OK, I am only an AS student so im not sure how much I can help and my theory will be quite basic, but-

-A trade defecit is where a country is importing more than it is exporting.
- Obviously when looking at trade defecits, you have to consider the size of the defecit, as the larger it is, the more of a concern it is.
-Large and sustained trade defecits can effect AD, as looking at the components of AD (C+G+I+X-M), fewer exports and more imports are going to cause a leftward shift in AD, slowing down economic growth and expansion.
- It is possible for a 'credit crunch' to occur, when foreign lenders refuse to lend any more- have to return current account to equilibrium.
-In order to do this the country needs to either cut down on imported goods or start exporting more (which affects the amount of goods available within the domestic economy), and thus, reducing consumption and living standards.
- Small sustainable trade defecits are not really a cause for concern.

However- (1 evaluative point and you can do some)

- the fact that people are importing more than there ae exports shows that domestic firms have to become more price competetive. Whilst on the one hand, this is good for the state of the economy, i.e cutting costs, more efficiency, firms may decide to cut jobs, thus increasing unemployment (which obviously is not good for the economy.

Right, Im off for food. Hope that kind of helps for the first question.

Reply 76

tanusha-tomsk

ash213

(b) to what extent might the pursuit of full employment conflict with other economic objectives?
(60)

b)Low and stable rate of inflation. According to the Phillips curve, zero unemployment (full employment) can only be achieved together with high inflation. That is primarily due to the fact that the economy will be overheating with large amounts of goods and services produced (which leads to higher incomes for employees >> higher consumption >> further increases in employment >> etc) and constantly rising consumption.
The benefits of full employment to the government are increased revenue (fewer unemployment related benefits [JSA] and increases in income tax revenue).
The disadvantages of high inflation to the government are a rapidly rising deficit on the BofP (lower competitiveness of UK goods >> lower exports >> higher value of imports), strong inflationary pressures to raise interest rates, increase taxation or cut government spending (which means lower spending on infrastructure, NHS etc – makes the government look bad). Implementing a deflationary fiscal &/or monetary policy would reduce employment – it is either one or the other. Costs outweigh benefits, and that is why some unemployment is acceptable: normally around 3% which is the Natural Rate of Unemployment.

Economic growth. Full employment goes well with economic growth because the resources (at least human if not capital) are employed fully (even if not efficiently), which means the point at which the economy is operating is on the PPF (or at least closer to the PPF). Other things being equal, PPF will move outwards i.e. an increase in the productive potential of the economy will take place = economic growth.

Enviroment does not generally benefit when the economic growth is high; higher output = pollution. However, in the end more developed countries can afford to pay more attention to their enviromental controls etc.

Balance of Payments C/A equilibrium. Full employment >> high inflation. If the interest rates are constant, but the rate of inflation is higher in the UK than in Europe/ USA, then UK goods become less price-competitive (e.g. 2 dollars buy 1 pound, say a bus ticket. Prices have risen and a bus ticket costs £1.5 >> $2 buy less than before, the real value of dollar in the UK falls). That means foreign demand for UK goods falls and UK demand for foreign goods rises >> (X-M) falls / becomes negative. In the Balance of Trade - trade in goods – a deficit increases (there is normally a deficit anyway).

thank you!

ash213

b)evaluate two policies wich the UK government might use to increase the competitiveness of the country's goods? (10)

ppplllleaaaseee heelllp!! been stuck for ages

The first question has been answered correctly (well done chazzinio, and you don't do any more about that at A2).

b)To increase competitiveness you either have to drop prices (i.e. price-competitiveness) or improve the perceived quality of the products.

On the first one, the UK government can grant subsidies to domestic producers so that they could produce at lower cost and lower prices. However, the use of this policy is limited, especially within the European Union, because it is an example of a non-tariff barrier. Also, it promotes inefficiency because it results in misallocation of resources (high cost uncompetitive firms are allowed to produce whilst low cost efficient foreign businesses lose out on revenue and have less incentives to invest etc.)

The government could also play with the exchange rates (as in Marshall-Learner theory); depriciating exchange rate will make domestic goods more price-competitve overseas, raising the demand for them (has a good side-effect on the BofP). However, this will not result in an actual increase in competitiveness (the businesses won't be more efficient, but tthey will use favourable conditions and will be seen as more efficient). Also to the limited use which depends on the type of the exchange rate system. To influence the exchange rates the government would have to sell of some reserves of domestic currency (increasing the supply of pounds >> the S curve shifts to the right).

I think that's enough for 10 marks :smile:

Reply 79

CorpusNinja

lol yeah. if Chirac and his cronies could physically build a 'great wall' around the current EU, i'm sure they would proceed with little hesitation. The whole concept of the EU makes no sense to me, more so having studied the EU module. Not good. :mad: