Competition - post a photo you've taken of nature >>

Question spotting for F585 Economics The Global Economy OCR A level June 2011

Scroll to see replies

Reply 440

viksta1000

Original post by revisionnightmare

If it's not it'll be the first time it's happened. I don't think they'd do that to us.

ITS A TRAP!!! :eek:

.....the exam is going to be on sustainable development.....lol jk, its defo trade liberalisation :biggrin:

but then again it is OCR, so I wouldn't be surprised if they do ask about something totally irrelevant to subject :wink:

Reply 441

Tariq_3458

What the hells dependency theory :/ !

Reply 442

Outsanity

Original post by revisionnightmare

If it's not it'll be the first time it's happened. I don't think they'd do that to us.

After falling victim to the 8 mark impossible question in D1, I no longer trust OCR with anything :tongue:

Reply 443

rahyahrah

zzz

(edited 12 years ago)

Reply 444

viksta1000

Original post by rahyahrah

Thank you!

So does that mean, if you have to analyse a concept, you talk about the benefits and costs of it? Or does that count as evaluation?

basically, if the question is worth more than 4 marks.....balanced argument :wink:

Reply 445

ajayhp

Comment on the limitations of the ECB maintaing a policy of low interest rates as away of helping the EU economy during a recession

here is what i got demand-pull inflation due to consumption and investment rising = AD increase. However is AD near full capacity, this will only occur if AD is close to full capacity. Creates inflationary noise, so consumer confidence and firms confidence decreases due to mis allocation of resources. An increase in menu costs. Its more of a short-term thing

Low rate of interest = Increases in consumption and investment due to availability of credit = this may cause demand-pull inflation = depends how close AD is to full employment
This creates noise and therefore creates uncertainty = consumer and business confidence is reduced
There is also a lack of convergence as some countries will be at different phases in the economic cycle = a low interest rate will have a different effect on each economy. Some will be experiencing high growth rates so a low rate of interest rates will accelerate inflation. Other countries may be experiencing slow growth, a drop in interest rate will therefore be beneficial as they will achieve higher GDP due to an increase in consumption and investment
Setting Low interest rates for the EU as a whole depends where the countries is in the economic cycle, as changes in interest rate will effect each country differently

(edited 12 years ago)

Reply 446

Elponchis_LOL

Original post by ajayhp

but it says near a recession, so it can't be close to full capacity
i think they want you to introduce idea of the different sub eu economies, like how it effects germany and francem and how it effects piigs
how its difficult to get right level of interest rates to effect them both. All at different business cycles, leaving low interest to long will lead to demand pull inflation eventually which will have damaging effects but will likely help piigs countries, etc

(edited 12 years ago)

Reply 447

revisionnightmare

Original post by viksta1000

ITS A TRAP!!! :eek:

.....the exam is going to be on sustainable development.....lol jk, its defo trade liberalisation :biggrin:

but then again it is OCR, so I wouldn't be surprised if they do ask about something totally irrelevant to subject :wink:

Haha oh dear! If that happened I'd find myself writing a 8 page essay on the flaws of the exam system in this country, specifically commenting on OCR.

Reply 448

viksta1000

Original post by ajayhp

beautiful question, can conjure up a balanced argument

most obvious one...lack of convergence
some economies are experiencing a recession, whilst others are experiencing growth with high inflation, low interest rates may well increase AD in the 'bust economies' however it will be at the cost of simply increasing AD and inflationary pressure in the booming economies

further more, low interest rates will make borrowing cheaper and hence increase domestic investment, this will increase AD and hence economic growth, it will also mean that paying back current account debts will be cheaper however low interest rates will deter foreign direct investment (FDI), low interest rates will also reduce the exchange rates as demand for the Euro will fall, this means that imports will be more expensive which can affect producers as raw material costs will rise and induce cost-push inflation thereby reducing competitiveness and making exports more expensive (even though they should theoretically be cheaper with a depreciated exchange rate)

I dunno how many marks this question is, but there are numerous limitations to monetary policy/low interest rates

hope this helps

Reply 449

ajayhp

Original post by viksta1000

is the euro fixed or freely floating? how can you say that the interest rate will have an effect on the ER

Reply 450

Elponchis_LOL

whats an evaluation point to 'fixed is better for foreign direct investment'

Reply 451

viksta1000

Original post by ajayhp

is the euro fixed or freely floating? how can you say that the interest rate will have an effect on the ER

its freely floating

because if you reduce interest, foreign investors are going to take there money to an economy with a high interest rate as the return on investment is better

the demand for the Euro will fall with the lack of interest from foreign investors and hence exchange rate will fall

This is by theory..in practice the ECB induced stable inflation in the Euro when it was launched, confidence in the Euro grew, so FDI into the Eurozone sky rocketted and foreign economies began using the Euro as a reserve currency due to its stability

but examiners are not looking for your ability to point out reality, they want to see you analyse it from an economic theory perspective, then relate that to the Eurozone

so they'd want you to write something along the lines of....low interest rates would reduce exchange rates...yadda yadda yadda....however the high level of foreign and domestic investment in the early establishment of the Euro meant that the Euro had gained strength and infact appreciated...this meant exports were more expensive adding to lack of competitiveness experienced by Eurozone economies...yadda yadda yadda'

:biggrin:

(edited 12 years ago)

Reply 452

Outsanity

Original post by Elponchis_LOL

whats an evaluation point to 'fixed is better for foreign direct investment'

Depends what value your currency is fixed at, if it was pegged at an over-valued level there would be little incentive to invest in your economy - too costly.

Alternatively you could argue that even if your currency was pegged at the perfect value, with little business confidence in the economy, FDI would not be forthcoming.

That's what came to mind anyway.

(edited 12 years ago)

Reply 453

Elponchis_LOL

Original post by Outsanity

cheers!

Reply 454

mqt

Original post by ajayhp

Got a q
Comment on the extent to which "positive impact of national stimulus packages is at best temporary

I understand that weakening fiscal multiplier has something to do with it

and

Comment to the extent that Spain's dependence on the housing industry has led to a delay recovery

I understand that 15% of unemployment is from the housing industry and then talk about AD and AS analysis on a fall in consumption and in the LR a fall in the labour force due to negative multiplier effects and negative accelerator effects. These directly affect the economic cycle and of course the gov finances on unemployment benefits which are very generous and contribute to the unemployment trap. The main cause is due to a brain drain which has been caused by highly skilled workers to leave, leaving a workforce who isn't productive and lower productivity means high unit labour costs which then get passed on the consumer, at which the consumer substitutes. This equals more job losses and less consumption and waste of resources. The dependence on the construction industry depends on the size of unemployment. Consumer and business confidence?

what else does it depend on?

Hey not sure if anyone replied yet, but for the national stimulus packages
- Positive, as it increases AD
- Temporary because, (using the keynesian curve) in a recession the national stimulus packages means that there's no inflationary pressures but in a recovery there is still inflation, but it's not that great. but in a boom period, (so long term when the economy starts booming), it just creates inflationary pressures rather than continuously stimulates economic growth.
-Therefore, long term, it would create a lack of competition in the economy. it is pretty unsustainble to grow in this way really
- Using national stimulus packages, so fiscal stimulus, creates an opportunity cost, and a big one
- However, in the short term, a multiplier effect can be achieved as well as an accelerator effect. BUT! this also benefits in the long term as well, as fiscal stimulus, so for instance, increasing government spending is usually long term, and takes long to take effect, such as spending on education? (although, it would be pretty safe to say this is more of a supply side policy)
-depends on how big the government spending increase is, how big the tax cut is, what is it spent on? As increasing govervnment spending for the sake of economic growth is bad, but investing it will help promote longer term effects..also, it can also depend on your viewpoint, as in a classical view, any fiscal stimulus will bring inflatonary pressures...

for the second one,

The construction one... i think that it's going to also depend on how flexible the workforce is...? maybe... Cause they may be dependant on the construction industry, but if the workforce was flexible enough to apply their skills, and even how mobile the workforce is...then the labour force could make sure themselves that they can have work instead of being stuck in recession?

Erm..but what you said already seemed pretty straight forward and clear. I'm sure it won't be more than a 6 mark question anyways. So you've probably got enough there :smile:

Reply 455

Tariq_3458

People.. has the stimulus material toolkit got evrything u need to know init ?

Reply 456

revisionnightmare

Original post by Tariq_3458

People.. has the stimulus material toolkit got evrything u need to know init ?

Yeah pretty much. Top up your knowledge with this thread and give the Colin Bamford OCR a little read if you have it.

Reply 457

Tickles

Help with this one please :smile:

Analyse the factors that will affect the rate of recovery of the spanish economy? 6 marks

I have the mark scheme for it but want other students ideas. Could anyone explain a few pointers of how an economy can recover from a reccession...what policies should be implemented. Obviously these are inhibted with the restictions of being an EU member. TA