OCR Economics F585 June 2012

Reply 380

farrukhkhan01

Original post by Groat

Did you do F583? If so, think back to MRP theory.

No i did transport but il have a look at MRP in the text book, but what does this stand for?

Reply 381

farrukhkhan01

Original post by Placebo101

That's my guess

thanks

Reply 382

Groat

13

Original post by farrukhkhan01

No i did transport but il have a look at MRP in the text book, but what does this stand for?

Marginal Revenue Product. To summarise, the theory states that the demand curve for workers will follow their MRP (the increase in revenue they bring to the firm when hired). This is downwards sloping due to saturation or overcrowding in the workplace. As a result, any increases in productivity is represented by a right shift in the MRP curve.

Reply 383

Groat

13

Original post by Placebo101

Made this list of every single definition we'll need for this exam (except some obvious stuff that's unique to the extract, we won't have to use in the exam anyway):

https://docs.google.com/document/d/1ZHHanHJPZPe8d_RrPGGhj2XP91cS2t129zrHSKnPX88/edit

Some of these are incredibly shortened.

Reply 384

owen1994

11

[QUOTE="Popsicle1;37915487"]

Original post by owen1994

The severity of the affect on inflation will be determined by the size of the change in the interest rate, the speed at which the commercial banks alter their rates, the speed at which consumers and business react to these changes (e.g. determined by confidence/expectations) and the current position of AD on the LRAS. What I mean is, where the economy is producing in terms of its productive potential capacity, or its output gap.

QUOTE]

Could you explain the last evaluative point for me please?

Imagine the AD/LRAS diagram. This picture I have linked is the reverse way around. Basically, the impact of a change in AD on the price level depends upon where you already are producing on the LRAS. The flat line on LRAS represents full employment and max capacity, even if demand increases on the perfectly inelastic part of the LRAS, firms cannot increase supply, for this reason, its only inflationary, as firms just increase the prices.

On the other hand, if the economy has a negative output gap, this means the economy is producing at less than it's full potential. Which occurs where AD meets LRAS on the flat or the curving part. However, changes in AD at this point on the graph has less impact on the price level, this is because firms may still have significant spare capacity (They are making less stuff than they possible could e.g. machines are not fully utilised), therefore higher demand doesn't mean firms have to neccessary increase the price level. However, as demand picks up even further, this means AD will shift higher up the curve, the inflationary pressure rises as firms maybe soon running out of stock, so they up the price for there current stocks to make sure they dont go out of stock.

Or the other away around. If AD reduces, it will reduce the price level the most if the economy is producing at full capacity. This is basically an AS level evaluation, by simply manipulating the graph you can make a point referring to the effectiveness of changes in the Interest rate in terms of how itt affects inflation. e.g. Higher interest rates are most effective when producing at or close to max capacity to reduce inflationary pressure. But higher interest rates are least effective when there is large negative output gap and a high degree of spare capacity.

Reply 385

owen1994

11

Original post by Groat

Some of these are incredibly shortened.

I was thinking the same, but at least anon is contributing something I suppose :smile:

Reply 386

farrukhkhan01

Original post by Groat

Marginal Revenue Product. To summarise, the theory states that the demand curve for workers will follow their MRP (the increase in revenue they bring to the firm when hired). This is downwards sloping due to saturation or overcrowding in the workplace. As a result, any increases in productivity is represented by a right shift in the MRP curve.

Thanks il have read into it, are u doing this exam?

Reply 387

Groat

13

Original post by farrukhkhan01

Thanks il have read into it, are u doing this exam?

F585 - yeah!

Reply 388

farrukhkhan01

Original post by Groat

F585 - yeah!

ahh, this exam seems to be really hard, i hope they give us nice questions lol.
have you seen the tutor2u toolkit? its quite good, and it breaks things down well.

(edited 11 years ago)

Reply 389

deejayy

1

How is everyone preparing for this exam? Normally I just go through past papers for economics but that doesn't seem like a good idea for this exam due to the stimulus material changing each year.

Reply 390

Placebo101

Original post by chocolate_monster

What is the difference between nominal and real exchange rate?
I know what they are, but I can not explain what increase in each of them mean..

If there is a rise in nominal value would it mean there is a rise in real exchange rate?

On page 7, extract 2, the nominal rate is lower than real, what does that mean?

Nominal is the value in whatever currency we're talking about, adusted for inflation.

Real exchange rate is the value in purchasing power parity.

Reply 391

Placebo101

Original post by Groat

Some of these are incredibly shortened.

Really? Which definitions in particular?

Reply 392

uxa595

21

Original post by Placebo101

Nominal is the value in whatever currency we're talking about, adusted for inflation.

Real exchange rate is the value in purchasing power parity.

Nominal - The price of one currency in relation for another.

Real - The value of one countries GOODS in relation to another's, at the current nominal exchange rate. This measure does not overlook inflation unlike the nominal exchange rate.

Reply 393

Placebo101

Wow it's so easy to revise with this thread! My teacher gave me this list of all the possible questions. Send us a shout if here or via PM is there's any you can't understand or need answers for

Spoiler

Reply 394

Placebo101

Original post by uxa595

Nominal - The price of one currency in relation for another.

Real - The value of one countries GOODS in relation to another's, at the current nominal exchange rate. This measure does not overlook inflation unlike the nominal exchange rate.

Okay but how's that different from PPP?

Reply 395

chunkyjooj

2

Original post by chocolate_monster

What is the difference between nominal and real exchange rate?
I know what they are, but I can not explain what increase in each of them mean..

If there is a rise in nominal value would it mean there is a rise in real exchange rate?

On page 7, extract 2, the nominal rate is lower than real, what does that mean?

http://www.youtube.com/watch?v=4TBiBKNbM0g

If nominal rate is lower than real, the accusation of the Americans holds less merit. Watch the link above it is a great explanation and should solidify your understanding of this concept.

Reply 396

uxa595

21

Original post by Placebo101

Really? Which definitions in particular?

Many of those definitions arn't worth 4 marks, which is what definition/explain questions genrally are worth in f585.

Take the first definition: Short run economic growth.
This is the change in the actual real GDP in an economy, usually measured as a percentage over a given period of time. It can be shown as a increase in AD on an AD/AS diagram.

^
See, you didn't include real GDP. You just said an increase in output which doesn't necessarily mean growth. Then giving a little extra info is always great.

Reply 397

uxa595

21

Original post by Placebo101

Okay but how's that different from PPP?

Just spouting out PPP is correct but may not be enough to give you the mark. You have to show you understand it. So if you were to say "value in PPP", explain PPP.

This is if it's a 4 mark Q, if it's just a definition you added in a 10/20 mark Q, it should be fine.

Reply 398

owen1994

11

Original post by deejayy

How is everyone preparing for this exam? Normally I just go through past papers for economics but that doesn't seem like a good idea for this exam due to the stimulus material changing each year.

Going through questions a teacher linked in this thread which are based on each extract, then going from there probably.

Reply 399

Placebo101

Original post by uxa595

Many of those definitions arn't worth 4 marks, which is what definition/explain questions genrally are worth in f585.

Take the first definition: Short run economic growth.
This is the change in the actual real GDP in an economy, usually measured as a percentage over a given period of time. It can be shown as a increase in AD on an AD/AS diagram.

^
See, you didn't include real GDP. You just said an increase in output which doesn't necessarily mean growth. Then giving a little extra info is always great.

I don't think there are prescribed answers to this exam; I think it's about thinking things through rather than learning exact definitions. Output IS real GDP and the only difference between mine and your answer is the bit on the end about diagrams.

In fairness though I really like to be succinct when I'm answering things and what you put is more obvious to examiners.

(edited 11 years ago)

OCR Economics F585 June 2012

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