AQA Economics 25th May 2012 Unit 2 Exam

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It's B because firms will be more likely to expand production by using the spare capacity because they have spare capacity, they can bring in capital such as machinery they are not using. It would pointless buying new capital when you have capital which is not being used just sitting there.

Also the questions say aggregate investment not aggregate demand. That confused me when you initially asked the question.

oh kl my bad and thanks

Reply 61

The Doggfather

Original post by Jim Riley

There is a free online revision clinic with Geoff, Mo, Ian and the tutor2u Econ team tomorrow evening (22 May) from 8.30 pm for anyone who would like a little extra support ahead of Friday. over 450 students logged into the first AS Macro clinic - a similar number expected tomorrow night!

http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-unit-2-economics-online-revision-clinic-tuesday-22-may-2012

Jim

ok!

Reply 62

The Doggfather

"Using your economic knowledge, evaluate the extent to which external trade can be relied upon to bring about a recovery in the UK economy"

Help, how can I structure an answer to this into two separate paragraphs? One point per paragraph right, so which points could I use for a paragraph?

Reply 63

parachutes-

Original post by rss.914

why does an increase in spare capacity in an economy lead to a fall in aggregate demand ? :s-smilie:

anyone know....

Because think about it, if you have for example lots of computers in a room that your employers are using and you have five spare computers, you're not going to bother investing in more, hence leading to a fall in AD :smile:

Reply 64

ap1111

Hi all,

What would be the best structure for this question in terms of anaylsis and then what evaluation points, i looked at the mark scheme but was still a little confused

Evaluate the importance of supply side policies in controlling inflation (25)

Thanks

Reply 65

ap1111

Also, how would we talk about labour productivity for a 25 mark in terms of analysis on each macroeconomic objective but then how would we evaluate each of these points?

Eg it may lead to growth..Ev - it may not because of....?
Eg it may reduce inflation - EV - it may not because of...

Reply 66

undertaker1

Original post by ap1111

what year is this from?

Reply 67

Skilled

Original post by Samc12

This is my contribution to this thread
http://www.mediafire.com/?ql1jc2y41ce4hdq

Freshly robbed from the school server.
:smile:

I cant access it, the website has got an issue (bad request it says) can u upload it somewhere else please, thankx in advance. After u uploaded it somewhere else then please paste it here

Reply 68

megan.cl

Does anyone have any thoughts on what it might me on? Someone said earlier it may be on productivity? I didn't think productivity was even in Unit 2! Now i'm worried :redface:

Reply 69

ninegrandstudent

Original post by ohTS

Monetary policy: go into detail about the effects of higher/lower interest rates on the economy
e.g. high interest rates mean more hot money flows because foreign people can gain more from saving in UK banks, this high demand for the £ causes its value to increase which can cause a fall in AD because exports fall and imports rise. This lowers UK international competitiveness BUT (on a diagram) causes eased inflation because there is a movement along the SRAS curve which can stabilise an economy etc. - Every event leads onto another so you should never be stuck for something to write.
Interest rates also affect the cheapness of borrowing for consumers and producers so less/more consumption/investment.

Fiscal policy: tax cuts such as on income or corporation tax can be used as supply-side measures to encourage investment and higher labour productivity which shifts the LRAS to right and the PPF outwards(use diagrams)

With all your points about fiscal and monetary policy's effects you need to link it to the question as in saying that to be stable, an economy should have steady inflation (target of 2% CPI), steady sustained growth, low unemployment and a balanced balance of payments on current account.

As to your final question, the extracts usually have answers to the essay in them. For example for this question the extract might include a point you want to explore so you would simply start that paragraph with 'as the extract states on line 45' to introduce that point. Try to do this at least twice in your essay to make sure they see it because in some mark schemes you can't get above a certain mark without explicit reference to the text.

Good luck! :smile:

Having gone through my notes, this is how I'd answer the question. What do you think? I feel bad for struggling with ECON2, especially as I'm A2 :frown:

Intro
Define fiscal/monetary polices. Briefly go into macroeconomic performance (aims/objectives).

Fiscal
- Micro use = to discourage consumption of demerit goods.
- Keynesian fiscal stimulates demand (can be inflationary depending on LRAS curve). Best for short run, but unsustainable in long run.
- Supply-side is best for growth/innovation -> international competitiveness
- Progressive taxation more equitable in terms of income/wealth

Monetary
- Stimulating demand-side and supply-side
- Exchange rate/balance of payments link
- Inflation = main target but respects other conflicting objectives

Summing Up
- Objectives conflict, can't achieve simulataneously; need to settle for best mix
- Combination is probably required for stable economy, must consider external factors, as well as equity issues such as equality of income.

Thats the basis of my answer, I know its pretty bald. Obviously I'd flesh it out with analysis, diagrams and defintions. And I'd structure it more my paragraph, not straight-up-and-down fiscal vs monetary.

And thanks for the help RE referring to the data - guess I'll have to read it :rolleyes:

That was the only thing I lost marks for last summer (unit 1), just wish I found this unit as easy!

Reply 70

undertaker1

1 Which one of the following is most likely to shift the short run aggregate supply curve to the right?
A A fall in money wages
B A reduction in government spending
C A fall in the exchange rate
D A decrease in the productivity of labour

why is the answer A

11 A large rise in interest rates is most likely to lead to an increase in
A national output.
B investment.
C unemployment.
D consumption.

why c

questions taken from jan 06

(edited 11 years ago)

Reply 71

calanna

I did this essay as a mock and managed somehow to get 22, all I did was talk about how supply side may tackle cost push inflation but not demand pull and time lags and constraints of this policy and how monetry policy and fiscal could also be used to keep inflation lower
hope this helps :smile:

Reply 72

King of the Jungle

Original post by Samc12

This is my contribution to this thread
http://www.mediafire.com/?ql1jc2y41ce4hdq

Freshly robbed from the school server.
:smile:

you the don

Reply 73

xXACEXx

Got a strong feeling a question on unemployment is going to come up. Definitely, not attempting a suppy-side question cant really right as much on them.

Reply 74

King of the Jungle

Original post by undertaker1

If you draw the diagram you might understand when the SRAS, if it is shift to the left the price level is high but when you shift it to the right price level is low.

Cost of production is the main determinant of the position of the SRAS curve for example when production cost rise, perhaps because of rising wage costs, the SRAS curve shifts leftward.(Remember this example)

So if a fall in money wages the firm/company can supply more because they have more money thus shifting it to the right.

Reply 75

King of the Jungle

Original post by xXACEXx

Got a strong feeling a question on unemployment is going to come up. Definitely, not attempting a suppy-side question cant really right as much on them.

Why do you think unemployment will come up ?

Reply 76

1234sam1234

Original post by Skilled

I cant access it, the website has got an issue (bad request it says) can u upload it somewhere else please, thankx in advance. After u uploaded it somewhere else then please paste it here

Here is the link
https://docs.google.com/open?id=0B0h2KbOovFnzTXdxYjlHelhjMjQ

Reply 77

. . .

Original post by undertaker1

1. SRAS curve is drawn under the assumption that raw material costs, wage rate and taxation (such as corporate tax which is tax on the profits remains constant). In other words it is drawn on the assumption that cost of production stays constant.
If money wages fall then cost of production will decrease. This shifts the SRAS to the right because it means at each output level the price level is less because the cost of production is less.

2. An increase in interest rate means consumption decreases as people are saving instead of spending. Assuming all other components of AD remain the same (investment, government expenditure, exports and imports remain constant) AD will fall. If AD falls, output falls and economic growth decreases in other words we enter a downturn or a recession so unemployment increases.