Edexcel Economics Unit 4: 20th June 2012

Hiiii You really shouldn't have said that... your not going to go to sleep anytime soon

Soo... any topics that are very likely to come up? And if so, (for section A) any 'Application' i.e. real-life quotes/info that is relevant according to those topics that may come up?

Sorry for asking another question but is the Phillip's curve shaped that way because higher wages need to be offered to move people from unemployment? that seems odd because unemployment that counts isn't voluntary

Well, I have condensed my notes down from 40 odd pages to 7 and have transcribed them into audio, so I will listen to them on loop when going to bed and in the morning.

I don't really have any preference on what I hope comes up, though having said that, the Eurozone crisis is a huge can of worms I hope they don't open, or if they do, that the Unit 2 lot get it!

I do hope that whatever they ask is clear and unambiguous, because some of the previous questions have not been clear at all. For example, "To what extent is reducing the number of people living in absolute poverty sufficient to achieve economic development?". Also, those consecutive questions that are very similar to each other bug me very much, as I doubt you'll get credited for the same answers:

With reference to Figure 2 and Extract 2, assess the benefits of foreign direct investment in primary sector industries of countries in Sub-Saharan Africa.
With reference to Extract 2, evaluate the benefits to African countries of increased trade with the BRIC economies.
With reference to Extract 2, to what extent might aid from the ‘BRIC’ economies promote development in Sub-Saharan Africa?

1. D for commodities up -> derived D for labour up -> greater incomes.
2. D for commodities up -> derived D for labour up -> greater incomes?
3. Capital programmes -> Job creation -> greater incomes?!

Usually I just skim the case study and questions for words I don't like, but now I'll be looking for questions that are too similar.

Anyone got points for Devaluation of currency please? x

Hi there, i'm a little confused with this question:

To what extent might a higher level of savings in the USA be sufficient to eliminate trade imbalances between China and the USA?

This is another question but from the devlopment section. It saus that investment, technological change and saving are key variables in determining growth. I understand that technological change will push out the PPF and increase economic capacity and I understand that investment like FDI will improve BoP position, reduce unemployment, stimulate growth and increase tax revenue but why would you want to save? To increase Capital/currency reserves for lending and trade respectively? Sorry about the essay...

Can someone please just name factors that effect international competitiveness

These are just very brief, you can expand hugely on them:
-Increased competitiveness as exports are cheaper.
-Imports more expensive, combined with the point above this results in improvement in BoP deficit.
-Increased GDP
-Possible inflation

Evaluation:
-Marshall-Lerner condition + J-curve effect
-If export market is experiencing slow growth + has low demand for our goods (as EU is doing now with us), we may not see an improvement of the BoP deficit
-Devaluation may not be feasible as the UK has a floating exchange rate
-Import inflation on raw materials that companies use, wage-price spiral

Non price factors. E.g. Quality, reliability and design.
Pricing factors.
- Relative Unit Labour Costs
- Relative Inflation
- Real Exchange Rate
- Wage Costs (most significant cost of production)
- Non-Wage Costs e.g. National Insurance Contributions
- Pension Schemes
- Health & Safety Regulation.

Not to sure on this myself, if anybody could elaborate would be extremely grateful.

Thanks!! x

Haha, thanks for you help

When it says 4 points, is that 4 marks per point? And if so, how would you get the 4 marks? Could anyone please give me an example? Thankss.

Anyone got points for Devaluation of currency please? x

Can someone please just name factors that effect international competitiveness

To generally improve the BoP position:

Devaluation results to a depreciation in the currency. The marshall-lerner condition states 'devaluation will lead to an improvement in the current account (x-m) if the combined price elasticities of exports and imports are greater than 1.
This is because the effectiveness of a depreciation is partly dependant on the PED of the good.

A j-curve will illustrate the devaluation

The current account will get worse before it gets better due an initial inelastic change in demand as it takes time for countries and firms to react to that change in price, as it takes time for them to switch suppliers and they may have to honour any contracts.

Meanwhile - sellers are selling at a lower price
- buyers are buying at a higher price
as exports become cheaper and exports more expensive. Causing a worsening of the current account

EVAL:
devaluation can cause imported inflation which means that the increased competitiveness caused by the devaluation can quickly be eroded.


Other Policies to improve BoP position:

Deflation
If govt reduces AD by increasing interest rates, taxes and consumption will fall consequenting in a decline in imports. The initial appreciation in the £ will be offset by a fall in AD in the long term, however this will create unemployment and reduce growth

Protectionism
Will reduce imports however this may lead to the country becoming internationally uncompetitive in the LR as they have a lack of incentive for efficiency or innovation. Protectionism also invites retaliation and is forbidden under WTO and EU rules

Supply Side Policies
To reduce unit labour cost to become competitive internationally to increase FDI which increases imports and reduces exports and also increases inflow of capital helping the BoP

Ah, i remember this question!

Ok so increased savings means that less money is withdrawn from the circular flow in the form of imports, as more money is going into savings. This will eliminate a trade imbalance as the USA starts to import less from the USA as consumer demand decreases.

Also this is reduce the savings gap, meaning that there is now more room for investment and to increase productive capacity and export more to China.

Can also reduce the foreign exchange gap, which can slightly strengthen your currency as there is a now a lesser supply of the currency on FOREX markets. This can lead to cheaper imports (SPICED - strong pound imports cheap exports dear ) reducing the trade imbalance

Staying all night..at my peril.