[Wbradbury]

(Original post by TheSelfAcknowleged)
What would the EU be taxing to encourage sustainability? Would they tax fuel usage?

I just call it a pollution tax but I guess you can be more specific. Also mention tradable pollution permits, as they too can promote sustainability

[uxa595]

(Original post by TheSelfAcknowleged)
Is this correct then?

Currency A: Currency B
1 unit of currency A: 2 units of currency B

If the currency A country's prices rise, more than currency B's country's prices rise, then it takes more of currency B to by currency A in real terms, and thus there is a real appreciation of the value of currency A in their country and a real depreciation of the currency B in the other country (B)?

I wouldn't use the world "real" here. Real would mean you are taking into account inflation, which you're not with a simple exchange rate.

The PPP of a currency gives you a picture of it's real exchange rate.

[Placebo101]

(Original post by uxa595)
Where does that come into anything though?

He's talking about which currency you would have to buy in.
Clearly, if it's a Chinese company, selling goods in Yuan, you have to covert £ into Yuan.
Whether it's fixed or floating is irrelevant.

He wouldn't buy the Yuan from the foreign exchange market though, he'd buy it from the government, which would effectively mean he'd buy the good in pounds.

[uxa595]

(Original post by Placebo101)
He wouldn't buy the Yuan from the foreign exchange market though, he'd buy it from the government, which would effectively mean he'd buy the good in pounds.

No?
He could get the currency from anyone he wishes in trade for £. However, he will then have to use that money to buy the good.

Convert pounds, then buy.
Doesn't matter who you convert the pounds with.

Also, a fixed exchange rate is still sold in exchange rate markets. It's just fixed because China will intervene when the price changes. If the price goes up, they will use forex reserves to buy Yuan. If the value drops, they will buy more of other currencies.

[Placebo101]

(Original post by uxa595)
No?
He could get the currency from anyone he wishes in trade for £. However, he will then have to use that money to buy the good.

Convert pounds, then buy.
Doesn't matter who you convert the pounds with.

Also, a fixed exchange rate is still sold in exchange rate markets. It's just fixed because China will intervene when the price changes. If the price goes up, they will use forex reserves to buy Yuan. If the value drops, they will buy more of other currencies.

Good call. I'm incredibly confused about this now though. Could someone explain how this works lol?

[uxa595]

(Original post by Placebo101)
Good call. I'm incredibly confused about this now though. Could someone explain how this works lol?

Ok :P

All normal currencies are sold on the exchange rate market, fixed, floating and managed if you count that as a type. The value of a truly floating exchange rate is calculated by the supply and demand of the markets.
A fixed exchange rate is also on the exchange rates market. However, when the value of the Yuan falls, China will intervene, buying more yuan and raising it's value again, thereby, the Yuan's value is fixed.


A nice example is how the £ use to be fixed against the old German currency. It was sold as usual on the exchange rate markets. However, speculators thought that the value of the £ was too low and never represented it's true value. So obviously, when something is undervalued, you buy loads of it. This is turn raised the price of the pound. The UK tried to combat this by selling more pounds and trying to dilute the supply. However, the investors clearly thought it was grossly undervalued and so they were buying like mad and the UK didn't have enough reserves to combat this and maintain the fixed exchange rate. Since then, the UK has become a floating exchange rate and the BoE/govt try not to intervene in the markets.

[farrukhkhan01]

Why can't they pursue fiscal and monetary policy at the same time?

[cakeonmymind]

(Original post by farrukhkhan01)
Why can't they pursue fiscal and monetary policy at the same time?

Because pursuing tight fiscal policy in order to cut the budget deficit is deflationary and they can either pursue:
1) tight monetary policy where interest rates rise and AD falls weakening the economic recovery or
2) loose monetary policy where IR stays low and AD increases undermining the tight fiscal policy

[cakeonmymind]

Can someone help with answering these 2 questions please:
1) Discuss the importance of credibility in successful monetary policy management.
2) To what extent does successful monetary policy depend on a credible fiscal policy?

[Clare1994]

(Original post by Shana133)
Thank you Clare! however when it says "threat to growth and development". Does it mean threat to global growth and development or threat to China's growth and development. A little confused.

The essay we did was to do with global growth and development.
Tbh for the last question i reckon it'll be connected to the EU in some way because of the policy they've set.

[Clare1994]

When you realise all this time you've been writing notes but not been properly revising so it hasn't been going in...
Sh*t 3 days to revise for this exam and two for law... I'm screwed!!!

[Clare1994]

How are people revising? Are you all just doing a load of questions?

[nickolijak]

(Original post by Clare1994)
How are people revising? Are you all just doing a load of questions?

making notes on the 70 page tutor2u document and the 3commentary extract document then skimming through the book and looking at questions

[Clare1994]

List of possible questions. (All the questions i've been given by my teacher and found in notes)
6. analyse how higher inflation might be a way inwhich China can avoid some of the problems of the persistent current account surplus.
10. How might allowing inflation that is occuring in china help to rebalance the economy?
4. what is monetary policy?
4. what does sustainability require?
4. What is the difference between a real and fixed exchange rate?
4. explain the relationship between growth and development.
4. what is the difference between nominal and real exchange rates using fig. 2.2.
6. using a diagram, analyse the relationship between the extent of spare capacity and inflation.
4. distinguish between external and domestic demand.
4. Explain figure 2.2
10. Comment on what impacts the Chinese government should be looking to establish from this rapid growth?
10. comment on the extent to which a reduction in the rate of economic growth in China would be beneficial to the chinese economy.
10. comment on how inflation might actually help rebalance the Chinese economy.
10. Comment the market failure resulting from the increase in the environmental footprint as a result of the rapid growth of the world economy.
6. Why might increasing interest rates to control inflation in china be difficult with a fixed exchange rate?
6. Analyse the usefulness of the ISEW in measuring China's economic progress.
6. Analyse the consequences of economic growth on china's BOP.
10. Discuss the use of monetary policy to achieve economic growth/reduce the effects of the recession.
20. Discuss the costs for the global economy of quotas on the extent of quotas on the export of rare earths from China.
10. comment on the causes of inflation in china.
4. explain what is meant by sustainable economic development.
10. comment on the relationship between savings and investment in China.
10. Comment on the constraints on economic growth and development.
6. would a appreciation of the Yuan help to reduce the Chinese-US trade imbalance?
4. explain the elements which make up the index of sustainable economic welfare (ISEW)
10. Comment on the ISEW in judging China's economic progress.
6. explain why 'increasing interest rates to control inflation is difficult when a country operates a fixed exchange rate'?
4. What is meant by spare capacity?
10. Comment on the extent to which pursuing both monetary and fiscal policy credibility at the same time could put the UK's economic recovery at risk.
4. distinguish between real and nominal increases in economic growth.
10. What are the policy options for China in controlling inflation?
6. with the help of diagrams, explain how the yuan is pegged.
6. Analyse what might be some of the consequences of a lengthy period of rapid wage inflation in china.
20. Evaluate the usefulness of China's export ban in promoting sustainability.
4. what is meant by sustainable economic development?
6. using a diagram, explain how food prices and rising wages lead to inflation.
4. explain two possible reasons why governments should adopt the ISEW.
6. Analyse the impact on world trade of the 'undervaluation' of the chinese currency.
6. what are the reasons for some nations running persistent COP surpluses?
20. evaluate the relative merits of the national policy imposed by China in dealing with resource scarcity to that of the regional policies imposed by the EU in addressing the same issue to ensure sustainability.
6. Analyse why developing countries 'often face a trade off between economic growth and inflation'.
10. Explain the use and limitations of indicators such as SDP and ISEW in measuring sustainable economic development.
6. Analyse why china's economic growth may not be sustainable.
4. explain figure 2.1 annual average inflation rates in the BRIC economies 2000-'10
10. comment on the extent to which a reduction in the rate of economic growth in China would be beneficial to the Chinese economy.
6. Analyse what causes a fall in productivity.
6. describe the nature of monetary policy to promote economic sustainability.
10. With reference to extract 1, comment on the case for the BOE's MPC raising interest rates.
4. what is the liquidity trap?
20. Discuss the extent to which the emerging dispute over China's rare earths export ban is a threat to growth and development.
6. analyse the relationship between growth and development.
10. Breifly explain why QE is being used, how it is supposed to work and comment on it's limitations.
4. what is meant by ppp?
4. With reference to extract 1, what is meant by inflationary expectations?
6. Analyse why wages are rising so quickly in China.
6. Explain the functions of the WTO
6. explain the different positions held by richard posen and andrew sentance.
6. using a diagram, analyse the relationship between the extent of spare capacity and inflation.

[Taurus]

(Original post by cakeonmymind)
Can someone help with answering these 2 questions please:
1) Discuss the importance of credibility in successful monetary policy management.
2) To what extent does successful monetary policy depend on a credible fiscal policy?

Heres what I think:
1) Credibility is where the policy employed is believable and looks realistic in meeting its target. In the case of monetary policy it is seen to be credible if it targets inflation problems. For instance if inflation was above the symmetrical target in the UK the Bank of England's Monetary Policy Committee would employ a deflationary monetary policy where they raise interest rates which would reduce aggregate demand, due to consumption and investment falling as cost of borrowing is expensive etc..
Draw diagram of AD shifting to the left + explain how when AD shifts real GDP decreases and price level falls.

This shows that for this case the Bank of England's Monetary Policy Committee were able to reduce inflation to move back to their target range, as they reacted quickly by raising interest rates, which shows credibility.

If there is credibility people will believe inflation will not carry on getting worse, and will therefore not ask for a wage rise to meet rising prices, as they know inflation will eventually become stable.

HOWEVER if the policy was not credible, which could be due to rising inflation and no action from the Bank of England's Monetary Policy Committee, then people would expect inflation to continue rising. This would cause the problem of inflation expectations where people will ask for a wage rise, in order to meet rising prices, BUT this will cause firms costs of production to rise, which have to be passed onto the price causing the rate of inflation to increase. People may then ask for wage increases again, and this cycle could continue and cause a price-wage spiral. Andrew Sentance beleives this is the case currently which is why he wants to act quickly to raise interest rates, as there are time lags for which changes in a policy have effect.



Currently in the UK we did not have inflation in the target range since 3 years ago. This was due to increases in VAT which caused temporary inflation, but mainly the increasing aggregate demand and decreasing aggregate supply for commodities, which caused there price to rise. This is cost push inflation. Monetary policy only works by changing demand pull inflation. This is why the current base rate from the Bank of England of 0.5% can be seen to be wise, as we have recently entered a double dip recession and growth needs to be the main focus at the moment. Increasing interest rates will hardly reduce inflation if we have hardly any aggregate demand. Also expectations should not be a problem as currently unemployment is high and people are excepting lower wages for a job. They currently are in no position to negotiate higher wages. (link in with Adam Posens, just basically the same paragraph but Adam Posen believes that expectations wont be a problem, due to cost push inflation............ i would have but i forgot sorry....its too early )

Therefore credibility can be important to stop inflation from further increasing, but it depends on the situation. As discussed before currently we need more Aggregate Demand rather than a credible policy, as with no Aggregate Demand, even if inflation was stable, firms would go out of business due to low profits, and they would keep lowering there prices which could cause deflation, which is worse than inflation. This happened in Japan in (not sure of the time range...), and in the Bank of Englands report they were wary about this.


I will have a go at the other question later for you. I hope this helps

[Taurus]

(Original post by Clare1994)
List of possible questions. (All the questions i've been given by my teacher and found in notes)
6. analyse how higher inflation might be a way inwhich China can avoid some of the problems of the persistent current account surplus.
10. How might allowing inflation that is occuring in china help to rebalance the economy?
4. what is monetary policy?
4. what does sustainability require?
4. What is the difference between a real and fixed exchange rate?
4. explain the relationship between growth and development.
4. what is the difference between nominal and real exchange rates using fig. 2.2.
6. using a diagram, analyse the relationship between the extent of spare capacity and inflation.
4. distinguish between external and domestic demand.
4. Explain figure 2.2
10. Comment on what impacts the Chinese government should be looking to establish from this rapid growth?
10. comment on the extent to which a reduction in the rate of economic growth in China would be beneficial to the chinese economy.
10. comment on how inflation might actually help rebalance the Chinese economy.
10. Comment the market failure resulting from the increase in the environmental footprint as a result of the rapid growth of the world economy.
6. Why might increasing interest rates to control inflation in china be difficult with a fixed exchange rate?
6. Analyse the usefulness of the ISEW in measuring China's economic progress.
6. Analyse the consequences of economic growth on china's BOP.
10. Discuss the use of monetary policy to achieve economic growth/reduce the effects of the recession.
20. Discuss the costs for the global economy of quotas on the extent of quotas on the export of rare earths from China.
10. comment on the causes of inflation in china.
4. explain what is meant by sustainable economic development.
10. comment on the relationship between savings and investment in China.
10. Comment on the constraints on economic growth and development.
6. would a appreciation of the Yuan help to reduce the Chinese-US trade imbalance?
4. explain the elements which make up the index of sustainable economic welfare (ISEW)
10. Comment on the ISEW in judging China's economic progress.
6. explain why 'increasing interest rates to control inflation is difficult when a country operates a fixed exchange rate'?
4. What is meant by spare capacity?
10. Comment on the extent to which pursuing both monetary and fiscal policy credibility at the same time could put the UK's economic recovery at risk.
4. distinguish between real and nominal increases in economic growth.
10. What are the policy options for China in controlling inflation?
6. with the help of diagrams, explain how the yuan is pegged.
6. Analyse what might be some of the consequences of a lengthy period of rapid wage inflation in china.
20. Evaluate the usefulness of China's export ban in promoting sustainability.
4. what is meant by sustainable economic development?
6. using a diagram, explain how food prices and rising wages lead to inflation.
4. explain two possible reasons why governments should adopt the ISEW.
6. Analyse the impact on world trade of the 'undervaluation' of the chinese currency.
6. what are the reasons for some nations running persistent COP surpluses?
20. evaluate the relative merits of the national policy imposed by China in dealing with resource scarcity to that of the regional policies imposed by the EU in addressing the same issue to ensure sustainability.
6. Analyse why developing countries 'often face a trade off between economic growth and inflation'.
10. Explain the use and limitations of indicators such as SDP and ISEW in measuring sustainable economic development.
6. Analyse why china's economic growth may not be sustainable.
4. explain figure 2.1 annual average inflation rates in the BRIC economies 2000-'10
10. comment on the extent to which a reduction in the rate of economic growth in China would be beneficial to the Chinese economy.
6. Analyse what causes a fall in productivity.
6. describe the nature of monetary policy to promote economic sustainability.
10. With reference to extract 1, comment on the case for the BOE's MPC raising interest rates.
4. what is the liquidity trap?
20. Discuss the extent to which the emerging dispute over China's rare earths export ban is a threat to growth and development.
6. analyse the relationship between growth and development.
10. Breifly explain why QE is being used, how it is supposed to work and comment on it's limitations.
4. what is meant by ppp?
4. With reference to extract 1, what is meant by inflationary expectations?
6. Analyse why wages are rising so quickly in China.
6. Explain the functions of the WTO
6. explain the different positions held by richard posen and andrew sentance.
6. using a diagram, analyse the relationship between the extent of spare capacity and inflation.

Absoulutely love it how you have put the marks by the side!

[Clare1994]

(Original post by Taurus)
Absoulutely love it how you have put the marks by the side!

Thanks haha the questions are rather jumbled though

[sarahharris]

This

http://anastasiaeaster.blogspot.co.u...am%20Questions

and this

http://anastasiaeaster.blogspot.co.u...label/Specific

will help

[sarahharris]

Go to this!

http://www.tutor2u.net/blog/index.ph...evision-clinic

[Lalaa]

The extracts should be our anthology.. we should / need to know them in side out !