OCR Economics F585 June 2012

So those 2 points basically mean:

- If the people lending their cash to governments dont feel confident then there will be a fall in credit ratings and thus governments will have to pay more for their lent cash as people see them as more risky
- As interest rates are higher when costs of borrowing rise... that's all I got from your second point

- Fiscal policy not being credible = loss of confidence in other countries/firms.
- Cost of borrowing will rise for the govt (this is implied by the rating falling from AAA >AA+)
- This rise in the govt's borrowing cost trickles into the economy, leading to higher interest rates.
- The higher interest rates mean the BoE has less control over inflation due to interest rates being constrained. Therefore, interest rates are less successful.

Do we no longer have a AAA credit rating? I thought we did but moody's have rated it with 'a negative outlook' or something.


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It's a made up situation. You can do that at A level economics

Do we no longer have a AAA credit rating? I thought we did but moody's have rated it with 'a negative outlook' or something.


This was posted from The Student Room's iPhone/iPad App

Do we no longer have a AAA credit rating? I thought we did but moody's have rated it with 'a negative outlook' or something.


This was posted from The Student Room's iPhone/iPad App

Finding a Horcrux is easier than getting a copy of the APT book on here... *sigh*

You say the last question can't be predicted but i have to just say my teacher has correctly predicted it 3 yrs in a row :P Last yr apparently she got it word for word but she does admit it's pretty much impossible to properly predict it this yr... But she probably says that every yr haha

discuss to what extent the emerging dispute over China's rare earths export ban is a threat to growth and development

I'll give it a crack:

What are the costs of protectionism?

Are they justified for conserving resources?
- Economic case for protectionism when resources are scarce -- link to China's monopoly on rare earths and how that could stimulate FDI, more export revenue ect

- Economic costs to China (encouraging competition in rare earth market, could potentially back fire, opening itself up to trade wars) mention costs for other countries = costs in more expensive technology (benefits to other countries? Stimulates rare earth production -> economic growth, particularly vital in countires like Malaysisa, which need to diversify their exports I think)

- Environmental case for protectionism -- China: means it won't pollute as much, need to keep pollution levels low as linked to poor development Rest of the World: Encourages more environmentally friendly ways of extracting rare earths so overall pollution levels from rare earths will fall in the long run.

- Environmental case against protectionism -- China's limits will be higher than they're currently producing so it doesn't limit the amount of actual pollution, just rate at which pollution is increasing. Setting up other rare earth extraction plants could be environmentally dangerous in shrot term -- especially if countries which have expressed interest in extracting rare earths persist (Mostly developing, don't have a good track record for pollution)

- Depends ultimately on nature of the resources being protected -- assumed China to be the case throughout, but could be other cases of resource depletion. Depends on how protectionism will be carrier out (think advantages of embargos ve tariffs for example)

- Do the costs outweight the benefits -- by how much? In Short term AND long term? Overall conclusion about this.


Not sure how you'd do the diagram though. Is there anything I missed?

surely an export ban reduces FDI?

Ahahahaha this probably made me laugh too much:

http://www.economist.com/node/21556991?fsrc=scn/fb/wl/kc/16jun12

No because firms are encourages to set up in China because of the cheaper prices of rare earths there vs exporting them abroad.

but why would firms invest in a country that is banning exports to them?

I hope that regional and national policy thing doesn't come up as the 20marker omg

in order to get the 'exports'. Toyota is considering building part of the production line that uses the rare earth needed in China because without the rare earth it wouldn't be able to make the Prius car (e.g. China bans exports so firms that need the move into China to get at them).

However firms may be more inclined to move away from these products if their able to.

same, however if it does you could easily structure it (as in local, national, regional and international policy) then just go through policies used at each level and evaluate which one would work best

tbh the only thing I personally think would work is if firms/countries are FORCED to be more sustainable via the profit/cost motive. They'll never move away from finite resources until they start to decrease and prices rise (bit of a pessimistic view!)

I hope that regional and national policy thing doesn't come up as the 20marker omg