Question spotting for F585 Economics The Global Economy OCR A level June 2011
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Original post by Tickles
yeh its good but so is the zig-zag one its deeeeceee 
yhhh.. zig zag one :s lol
Original post by Tariq_3458
People.. has the stimulus material toolkit got evrything u need to know init ?
do u have the toolkit on ur computer?
Original post by Indian_Princess
do u have the toolkit on ur computer?
yeahh
u want it ?
Original post by Hits1
If the 20 marker was regarding trade liberalisation, I would assume this is possibly the correct way of doing it:
Trade Liberalisation is the removal of barriers to trade, deregulation aimed at opening up a market or industry to full competition.
One benefit of Trade Liberalisation/free trade is that countries can achieve economies of scale - this is the ability for a country to produce at a larger scale and therefore results lower average costs enabling it to gain a comparative advantage and economic efficiency. Therefore this is will enable goods and services at cheaper prices hence a gain in consumer surplus/welfare. If countries can specialise in what they produce, other countries can also trade what they specialise in especially technological imports which determine the long run productive capability of an economy. However it depends as economies of scale and eventually can lead to diseconomies of scale whereby the result of economies growing too rapidly/much resulting in higher average costs, such an outcome would imply allocative and productive inefficiencies. Another problem is domestic companies may wish to protect thier infant industries therefore this can only be done through trade barriers and subsidies, as these premature industries may lack the ability to compete through price and other factors as international competitors are reaping the benefits of enormous economies of scale.
Another benefit of trade liberalisation/free trade is that by reducing the barriers leads to trade creation, this occurs when consumption switches from high cost producers to low cost producers - therefore a gain in consumer surplus/welfare. Therefore this enables consumers/firms to import goods and services cheaper without having to pay a tariff - and an increase in imports than otherwise if there was protectionism. [Insert Trade Creation Diagram Here] However... this will impose a threat on domestic firms as they will sell less and there is a loss of producer surplus as they cannot afford to compete with international firms through price and other factors.
Another benefit of trade liberalisation/free trade leads to an increase in exports. An increase in exports therefore improves/corrects the current account deficit. Exports also leads to employment - hence reduces unemployment as the country will potentially need to employ more with the increase in demand for goods and services which the domestic country specialises in. This enables governments to reduce their spending on unemployment benefits, as this is an opportunity cost in which they could spend elsewhere within the economy such as health, education. Export is a component of Aggregate Demand and therefore any increase in exports will lead to an increase in Aggregate demand. [Insert Diagram] However this will depend on many factors. For example the EU; if countries are in a recession, this may not necessarily lead to an increase in exports, as this will widely depend on the disposable incomes of those within the various countries and in addition during this economic cycle - consumer/business confidence is likely to be low therefore may not have such an impact. In addition this would also depend on Inflation - if inflation is high in such countries - then these goods and services are not likely to be as competitive therefore this may lead to a decrease in export led markets.
Another benefit is there will be an increase in Competition/Contestability etc..
I'm not sure.. i hope im on the right track lol sorry for the long answer
Although what else?
Trade Liberalisation is the removal of barriers to trade, deregulation aimed at opening up a market or industry to full competition.
One benefit of Trade Liberalisation/free trade is that countries can achieve economies of scale - this is the ability for a country to produce at a larger scale and therefore results lower average costs enabling it to gain a comparative advantage and economic efficiency. Therefore this is will enable goods and services at cheaper prices hence a gain in consumer surplus/welfare. If countries can specialise in what they produce, other countries can also trade what they specialise in especially technological imports which determine the long run productive capability of an economy. However it depends as economies of scale and eventually can lead to diseconomies of scale whereby the result of economies growing too rapidly/much resulting in higher average costs, such an outcome would imply allocative and productive inefficiencies. Another problem is domestic companies may wish to protect thier infant industries therefore this can only be done through trade barriers and subsidies, as these premature industries may lack the ability to compete through price and other factors as international competitors are reaping the benefits of enormous economies of scale.
Another benefit of trade liberalisation/free trade is that by reducing the barriers leads to trade creation, this occurs when consumption switches from high cost producers to low cost producers - therefore a gain in consumer surplus/welfare. Therefore this enables consumers/firms to import goods and services cheaper without having to pay a tariff - and an increase in imports than otherwise if there was protectionism. [Insert Trade Creation Diagram Here] However... this will impose a threat on domestic firms as they will sell less and there is a loss of producer surplus as they cannot afford to compete with international firms through price and other factors.
Another benefit of trade liberalisation/free trade leads to an increase in exports. An increase in exports therefore improves/corrects the current account deficit. Exports also leads to employment - hence reduces unemployment as the country will potentially need to employ more with the increase in demand for goods and services which the domestic country specialises in. This enables governments to reduce their spending on unemployment benefits, as this is an opportunity cost in which they could spend elsewhere within the economy such as health, education. Export is a component of Aggregate Demand and therefore any increase in exports will lead to an increase in Aggregate demand. [Insert Diagram] However this will depend on many factors. For example the EU; if countries are in a recession, this may not necessarily lead to an increase in exports, as this will widely depend on the disposable incomes of those within the various countries and in addition during this economic cycle - consumer/business confidence is likely to be low therefore may not have such an impact. In addition this would also depend on Inflation - if inflation is high in such countries - then these goods and services are not likely to be as competitive therefore this may lead to a decrease in export led markets.
Another benefit is there will be an increase in Competition/Contestability etc..
I'm not sure.. i hope im on the right track lol sorry for the long answer
Although what else?
This was so good thanks!
...i thinkt he last extract is really about being gloval... SO now you've spoken about how it affects countries directly, it would be really useful to explain on a global level. So who does trade liberealisation actually benefit. It benefits those that are developed more so than those who rely on primary products. This is because, in general agriculture is cheaper than products which are manufactured, a bowl of wheat is worth less than an iphone even though, maybe just as much labour was used for both products. Therefore, trade liberalisation benefitting on a global scale depends on what type of country you are from, like you said already, with the whole infant industry. I think you you try and get comparative advantage in their if you can, as opening up the market means that production is allocated to where it is produced most efficiently, and then on what basis is it traded. What terms of trade is set out to promote global growth
Original post by Tariq_3458
yeahh
u want it ?
u want it ?
yes pleasee
i'll pm u my email so u can send it, thanks.
Original post by nik2111
Does demand pull and cost push inflation effect competivenes?
only price competitiveness and it will push up prices = more expensive exports = less competitive
non price competitiveness is more to do with productivity/efficiency
I also think - on evaluation - that you can make the point that decisions may be based on statistics (as in the case study) that are later corrected - look at the data here:
http://www.gecodia.com/Euro-Area-GDP-Growth_r119.html
The way this is relevant is where Greece joined the EA on dodgy accounts.
http://www.gecodia.com/Euro-Area-GDP-Growth_r119.html
The way this is relevant is where Greece joined the EA on dodgy accounts.
Original post by Tariq_3458
yeahh
u want it ?
u want it ?
do u have the zig zag in pdf
Original post by viksta1000
do you know any reasons to evaluate the difficulties of the EU setting optimal interest rates
Original post by ajayhp
do u have the zig zag in pdf
nah jus work document
Original post by viksta1000
not really, there's pros and cons to every macroeconomic variable
HOWEVER...
•
high unemployment = less tax revenue and more government spending on automatic stabilisers/benefits - governments fiscal position will worsen
•
high unemployment also means that there is a contraction in AS due to the hyserisis effect whereby the labour force becomes deskilled when out of work
•
high unemployment means people will not be spending more, they have no income, so consumtion will fall, AD will decrease - GDP will contract
HOWEVER...
•
high unemployment means masses of labour, people are desperate for jobs and will work for coconuts...this can reduce costs making firms more competitive in the international market
•
high unemployment reduces cost-push and demand-pull inflation as firms can reduce costs and people cannot spend money, so AD will contract reducing inflationary pressure - again making firms more competitive
But even with the "however unemployment...people will work for coconuts" this is a theory really...as people more commonly people nowadays are very unlikely to take jobs with less pay. For example, someone who has graduated expects more than the minimum wage as they now have a "valued degree", and therefore are unwilling to work for coconuts.
Also this would highly depend on the politics of an economy. Like Spain, their welfare system system is causing higher rates of natural unemployment, as the benefits of being out of a job and on benefits are higher than being in a low paid job.
Original post by nik2111
only price competitiveness and it will push up prices = more expensive exports = less competitive
do you know any reasons to evaluate the difficulties of the EU setting optimal interest rates
do you know any reasons to evaluate the difficulties of the EU setting optimal interest rates
its just simply not possible due to the lack of convergence in economic cycles of EU members...but dwelling into optimal interest rates is verging on degree standard economics lol
All we've got to know is that there's no 'one size fits all' for interest rates in the EU, and thats due to differing economic cycles, political differences and the fact that each member still has control over its fiscal policies and supply side policies. Furthermore every member is operating in different markets, so the market conditions can determine whether or not an economy is booming or in bust
for example, Germany focuses more on the export market, its recovered well and has implemented supply side reforms to focus on LRAS improvements....spain on the other hand operates in few markets, the housing market collapsed and Spain is focusing on fiscal reforms (i.e. cutting welfare benefits) and different supply side policies (i.e. increasing working age) which seem to benefit the short run AS of the economy rather than LRAS
(edited 12 years ago)
Original post by mqt
But even with the "however unemployment...people will work for coconuts" this is a theory really...as people more commonly people nowadays are very unlikely to take jobs with less pay. For example, someone who has graduated expects more than the minimum wage as they now have a "valued degree", and therefore are unwilling to work for coconuts.
Also this would highly depend on the politics of an economy. Like Spain, their welfare system system is causing higher rates of natural unemployment, as the benefits of being out of a job and on benefits are higher than being in a low paid job.
Also this would highly depend on the politics of an economy. Like Spain, their welfare system system is causing higher rates of natural unemployment, as the benefits of being out of a job and on benefits are higher than being in a low paid job.
Yes but this is economics and not sociology
so think of it from an economical perspective...look at the entire labour market rather than one personSure, someone with a Phd in astrophysics wouldn't want a career as a waiter....but look at the labour market as a whole
jobs are scarce and people are desperate for jobs, people are struggling maintain their standards of living so they are simply looking to get back into work to get some money coming in
Spains welfare system is not politics, is economics
and yeah exactly, that's the whole point of economics...im not right, and neither are you...the fact is that we're both analysing a perspective of economics, so the fact that natural unemployment exists in Spain is a good analytical standpoint of a downfall in their fiscal policy
there's no right or wrong answers in economics as long as you can display a balanced argument
(edited 12 years ago)
Original post by Tariq_3458
nah jus work document
could u send it to me by any chance
Can Someone PLEASE Help Me!
This is what my teacher taught me:
The PIIGS has above average growth before the recession, but it was all demand led, and was not matched by supply. This meant the growth was short term in nature, and led to high inflation.
When the recession then hit, demand fell and the PIIGS were left with very weak economies because they had ignored supply side performance, which is vital for long term growth.
The PIIGS are now left with high labour and output costs, due to the high inflation pushing up wages and costs. This means they are uncompetitive within and outside the Euro area. Usually high inflation would lead to a fall in the value of the currency, but because the Euro is fixed for the PIIGS, this mechanism cannot work. To regain competitiveness, the PIIGS need to focus on improving their supply side performance.
Right, Here is What I dont understand.
If aggregate demand fell when the recession hit, why is inflation still high. I thought a fall in demand causes inflation to fall. So why didnt this fall in demand cause a fall in inflation, and hence a fall in output and labour costs.
Also, if there is low demand in the economy, what is the point in improving supply side performance. If there is no demand to match this rising supply, it will just lead to spare capacity and unemployment.
I dont understand how demand fell, but inflation has remained high.
Someone please explain this, I may be complicating things in my head.
This is what my teacher taught me:
The PIIGS has above average growth before the recession, but it was all demand led, and was not matched by supply. This meant the growth was short term in nature, and led to high inflation.
When the recession then hit, demand fell and the PIIGS were left with very weak economies because they had ignored supply side performance, which is vital for long term growth.
The PIIGS are now left with high labour and output costs, due to the high inflation pushing up wages and costs. This means they are uncompetitive within and outside the Euro area. Usually high inflation would lead to a fall in the value of the currency, but because the Euro is fixed for the PIIGS, this mechanism cannot work. To regain competitiveness, the PIIGS need to focus on improving their supply side performance.
Right, Here is What I dont understand.
If aggregate demand fell when the recession hit, why is inflation still high. I thought a fall in demand causes inflation to fall. So why didnt this fall in demand cause a fall in inflation, and hence a fall in output and labour costs.
Also, if there is low demand in the economy, what is the point in improving supply side performance. If there is no demand to match this rising supply, it will just lead to spare capacity and unemployment.
I dont understand how demand fell, but inflation has remained high.
Someone please explain this, I may be complicating things in my head.
Original post by Tariq_3458
Ahh can someone give me soo information on how liberalisaing that brings free trade to an economy, can affect poverty and development !
Agin, not sure if someones answered cause i'm trying to ctahc up on this thread again :P...
Erm trade liberalistion refers to opening up the market to make it more contestable, and i guess, is free trade.
When there is free trade, resources are allocated to where they are best produced and therefore, everyone can exploit their comparative advantages, specialise, (and in the theory of free trade), everyone benefits from being able to access more resources.
It can therefore benefit countries' development because they have access to resources, new technology and the best knowledge which can help them grow. Furthermore, as it is free trade, the would be free to import without the nuisance of tariffs, high tech machinery etc. to benefit the production of their resources. therefore, they can produce more! increasing their potential productive capacity.
With poverty, free trade means that more is consumed and more can be traded which can stimulate growth and improve peoples standards of living which therefore reduces poverty. In addition to this, Multinational corporations are more likely to invest in moving their production in those places which have the cheapest production costs or labour costs. And therefore FDI being an injection in to the circular flow of income, can multiply around the economy, creating jobs and income and growth in general.
however, this does not come without downfalls. FDi has been criticised as MNC's, can exploit cheap labour in countries such as India as they can pay labour next to peanuts and in countries which are still developing, they have no trade union to protect them from this exploitation. Therefore, the inequality grows between those rich and poor countries. Furthermore, although in general standards of living increase, relative poverty also increases.
Not only this, trade liberalisation although can benefit everyone depends on terms of trade. And also how well a country can deal with international competition, as infant industries cannot, and would need financial support, and therefore, development could actually be hindered...
There's so much more!...
- developing countries are the ones with poverty...but unfotunately developed countries tend to trade with eachother which means that developing countries struggle to be competitive.
- oh yes, i missed out all this, lower prices to enjoy, more choices, everyone becomes more competitive, more efficient, more productive, more contestability
-economies of scale can benefit the economy
-dynamic efficiency gains
-trade in actual knowledge stimulates development and production making better products, higher standards of living
-in the long run, if you're open to trade, you grow faster
etc etc...
Original post by boliver228
Can Someone PLEASE Help Me!
This is what my teacher taught me:
The PIIGS has above average growth before the recession, but it was all demand led, and was not matched by supply. This meant the growth was short term in nature, and led to high inflation.
When the recession then hit, demand fell and the PIIGS were left with very weak economies because they had ignored supply side performance, which is vital for long term growth.
The PIIGS are now left with high labour and output costs, due to the high inflation pushing up wages and costs. This means they are uncompetitive within and outside the Euro area. Usually high inflation would lead to a fall in the value of the currency, but because the Euro is fixed for the PIIGS, this mechanism cannot work. To regain competitiveness, the PIIGS need to focus on improving their supply side performance.
Right, Here is What I dont understand.
If aggregate demand fell when the recession hit, why is inflation still high. I thought a fall in demand causes inflation to fall. So why didnt this fall in demand cause a fall in inflation, and hence a fall in output and labour costs.
Also, if there is low demand in the economy, what is the point in improving supply side performance. If there is no demand to match this rising supply, it will just lead to spare capacity and unemployment.
I dont understand how demand fell, but inflation has remained high.
Someone please explain this, I may be complicating things in my head.
This is what my teacher taught me:
The PIIGS has above average growth before the recession, but it was all demand led, and was not matched by supply. This meant the growth was short term in nature, and led to high inflation.
When the recession then hit, demand fell and the PIIGS were left with very weak economies because they had ignored supply side performance, which is vital for long term growth.
The PIIGS are now left with high labour and output costs, due to the high inflation pushing up wages and costs. This means they are uncompetitive within and outside the Euro area. Usually high inflation would lead to a fall in the value of the currency, but because the Euro is fixed for the PIIGS, this mechanism cannot work. To regain competitiveness, the PIIGS need to focus on improving their supply side performance.
Right, Here is What I dont understand.
If aggregate demand fell when the recession hit, why is inflation still high. I thought a fall in demand causes inflation to fall. So why didnt this fall in demand cause a fall in inflation, and hence a fall in output and labour costs.
Also, if there is low demand in the economy, what is the point in improving supply side performance. If there is no demand to match this rising supply, it will just lead to spare capacity and unemployment.
I dont understand how demand fell, but inflation has remained high.
Someone please explain this, I may be complicating things in my head.
I think it refers to,
due to there being an inflexible labour supply, prices are still high due to costs are high as unit labour costs are extremely high. Could be on lengthy contracts so cant reduce employment, Cant reduce wages as there on fixed wage rate and not performance related pay. Trade unions may not be allowing firms to reduce wages.
It needs to improve supply side so that the economy is not over reliant one industry which theyve lost there competitive edge on. It allows them to be become competitive in other industries and needs government deregulation to open up competition and employment laws so that new industries can start to become efficient with lost costs again. Also imprive research and development to gain comparative advantage on new products. Also improve education and skills so it can branch of into different industries and not have structural unemployment. Could be low demand due to there being such high prices, trying to bring prices down by supply side polices may increase demand
i think
(edited 12 years ago)
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