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AQA Economics 25th May 2012 Unit 2 Exam

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I think its A. it cant be B because the price of imports would decrease. it also cannot be D, so its either A or C and i think A is more suitable

It can't be C because exports decrease and imports increase so the BoP position becomes worse.

Reply 141

theseeker

Just realised that this is in the morning not afternoon.

Reply 142

. . .

Original post by theseeker

Just realised that this is in the morning not afternoon.

I know I hate morning exams. :frown:

Reply 143

undertaker1

anyone else not understand this question:

Reply 144

megan.cl

Original post by undertaker1

anyone else not understand this question:

I'd Have said the answer is D?

The formula for AD = c+i+g+(x-m) , which is what the componants down the side are, and 524 is approximately 2/3 of AD, as it is approximately 2/3 if you add them all up.

Sorry if i explained that badly, (or if i got the answer wrong!)

Reply 145

undertaker1

Original post by megan.cl

your answer is correct but i dont understand the labels £bn at 2005 prices, %change on 2008, components of AD 2009

Reply 146

venenecinema

Original post by undertaker1

anyone else not understand this question:

Hi, the answer to that one is definitely D

Reply 147

. . .

Original post by undertaker1

anyone else not understand this question:

To find the 2009 value you divide the 2005 value by 100 then times by the percentage and add the answer on to the 2005 value.

This gives the figures

545 = C
151 = G
161 = I
254.5 = X
305 = M

AD = 545+151+161+(254.5-305) = 806.5

806.5/3 = 268.833333

268.833333 *2 = 537.666666

Which is approximately 524.

C is wrong because there is a current account deficit M > X
B is wrong because we cannot tell that from the data.
A is wrong well because it isn't.

Reply 148

undertaker1

Original post by . .

thank you very much, i understand it now

Reply 149

megan.cl

Original post by Matt_payne

Because recently the government has been constantly running a deficit, much like other eurozone countries, so it seems quite relavent that they would ask about whether the deficit matters, or something to do with deficits. As far as I know, they haven't asked about them before either.

Hmmm yes, I've looked over my notes though and i have hardly anything on the significance of a budget deficit, all i've got is that the interest payments can be high, and that there is a growth of national debt... Any other ideas?

Reply 150

undertaker1

when answering questions on uk's macroeconomic performance and we are discussing economic growth. what sort of things should we be discussing???

also when answering questions on macroeconomic performance, do we need to discuss all four components such as inflation, employment, balance of payments on current account and economic growth???

(edited 11 years ago)

Reply 151

. . .

Original post by megan.cl

Fiscal policy is closely related to budget deficits and surpluses.

Think of how changes in spending taxing and borrowing affects the four main macroeconomic indicators.

You could also link it to the current economics like the recent budget report.

Think of what the government spends money on and how spending on different things affect the economy in different ways.
So for example how increased expenditure on education and training is different from expenditure on welfare payments.

Reply 152

The Doggfather

Are there any particular topics I can get away with not knowing fully?

Reply 153

. . .

Original post by The Doggfather

Are there any particular topics I can get away with not knowing fully?

You may be able to pull off not knowing exchange rate policy and the balance of payments fully. This is of course a very strict strategy and you must know the rest of the subjects really well.
I have friends who did this although it was A2 micro exam he managed to just about pull off an A grade.

Reply 154

hannahjones13

Panicking a bit now - think it is exam nerves.
what is the affect of increased imports on AD and inflation ?

Reply 155

Matt_payne

Original post by megan.cl

I have a few ideas;
You could say that theoretically a deficit would act to stimulate demand, because G is a component of AD, therefore may be able to revive us from the recession.
But having deficits now, means tax rises in the future, unless the expansionary policy is significant enough to pay off the debt, in terms of increased employment, increased gov revenue. But we've so much debt from previous deficits that the multiplier probably wouldn't pay it off.
You could also argue that the deficit doesn't matter if the spending is allocated correctly. For example, supply-side policies is what the UK needs at the moment to enhance our productivity in areas where we have comparative advantage like financial services. But the government may decide to spend on things like increasing the incomes of public sector workers, which wouldn't benefit the economy, what the public sector really needs is efficiency. Alternatively they may spend on improving our manufacturing industries, which would also be a waste as countries like China can easily out-compete us to the extent that it's inevitable our manufacturing industries will go bust, no matter how much is spent on them. Therefore whether the deficit matters depends on what the money is spent on.
There the kind of point i would make, i hope this helped

Reply 156

Matt_payne

Original post by hannahjones13

Panicking a bit now - think it is exam nerves.
what is the affect of increased imports on AD and inflation ?

Increased imports lower AD and also generally lower inflation as it's likely that the goods we import from abroad would be cheaper alternatives to domestically produced goods, along with the high value of the pound having further deflationary effects