OCR Economics F585 June 2012

does anybody believe that they can ask us questions which are irrelevant to the extracts or factors that are not included but slightly related?

e.g. Compare and contrast the inflation targeting approach set for the Bank of England, and the targeting approach set for the European Central Bank.

This might be a stupid question but I really don't know what we use the case study for. The mock questions posted in this thread could be answered without using the case study.

Ohhhh that's a nice way to word the final question
Market based approaches = EU
Other approaches = China
Does that help?

If inflation goes up, surely there will be a reduction in demand for the GBP as british goods are more expensive, therefore the exchange rate in Britain will immediately depreciate? Surely imports become relatively cheaper, but nobody will buy from Britain and so imports fall anyway?

I'm just gonna try and list a few, see what you make of them:
It depends on the size of the increase in inflation - If inflation increases by a small amount then the effect on the cost of imports will be insignificant. The chinese will still buy imports rather than consume domestically as they are cheaper, but just by a smaller amount. The current account surplus will remain relatively unchanged.
It depends on the behaviour of the chinese consumers/current economic situation - If inflation makes imports more expensive than domestic goods then we can assume that domestic consumption should increase. However if consumer confidence in China is relatively low then the chinese may decide to save instead of spend. Domestic consumption is likely to increase, but not by a massive amount.

The second point is a bit dodgy as i made the assumption that consumer confidence in china is low. Can you think of any more points?

true ^.. also it links with the multiplier effect right?

FFS, typed a massive paragraph, pressed backspace by accident, everything is all gone. Cba to type it up again.. Wasted too much time already!! Gotta carry on with revision!

Could someone explain what short run aggregate supply is?

In the OCR text book it says:

SRAS: shows the level of production for the economy at a given price level, assuming labour costs and other factor input costs are unchanged.

But this staight after it says:

Changes in the cost of production, then, cause the SRAS curve to shift. Such as, labour costs, other input prices and taxes and regulations.

Doesn't this contradict, because the definition says that labour costs and other factor input costs are unchanged, while it then says that this cause the curve to shift?

I was hoping for more of a plan regarding how one would go about doing this question

I've got all the analysis - diagrams for subsidies, tradable permits, taxes on negative externalities etc etc

Got some evaluative points (not sure if these are right btw) - hard to determine a monetary value for most externalities, decision to place subsidise certain firms coule be controversial, opp. cost of subsidies, no effect on goods with inelastic PED and subsidies coud protect inefficient firms

Any more? I generally find evaluation quite a vague concept

We won't need to differentiate between short and long run AS in our exam.

However:
Short run- 1 or more factor of production is fixed.
Long run - All factors of production are variable.

Anyone is welcome to discuss this mock recently sat by various pupils:



1. Distinguish between growth and development (4)
2. using a demand and supply diagram show how an increase in world population could lead to an increase in the price of food (6)
3. Comment on the extent to which increased inflation in China could stimulate domestic demand (10)
4. Explain the functions of the WTO (4)
5. Analyse the benefits for EU countries of more energy efficient production techniques being used by European firms (6)
6. Comment on the potential barriers that the Bank of England are facing when trying tor deflate the economy through low interest rates (10)
7. Discuss the extent to which low inflation should be a primary target of any government (20)

Do we need to know about the role of stocks in the economic cycle? I look up the spec and there doesn't seem to be anything about the role of stocks.