Economics Unit 2 prediction for 17th may 2013 :)

What I'm unsure on is what happens when the value of the currency rises relative to other countries. I read about it in books, but my mind just goes fuzzy. Can someone please explain its impacts on other variables such as inflation, investment etc...
Thank you in advance!

Could anyone please explain to me what the actual difference between application and analysis is? I'm feeling good about my knowledge and evaluation, but up until now, I've been thinking these two were the same thing @_@.

Also, how many evaluation points should be included in the essay? I'm guessing around three or four, but it's better to be safe than sorry I guess. Much appreciated!

YAY!

Thanks for this!

Oh yeah if anyone wants a doc of all the past 30 markers

yeah same! s1 edexcel morning and this in the afternoon.

I kind of understand it but don't know how to explain 'crowding out effect' and quantitative easing properly
Same with hot money!

Also when you have to define CPI and explain how inflation is calculated I find myself writing an essay and the mark schemes just says:
weighting (1), basket of goods (1) etc !

Crowding out effect: is when an increase in government expenditure leads to a decrease in private sector activity either directly or indirectly. For example in the government builds a public library in the vicinity, household purchases of books at the local bookstore would decline or building a new hospital would result in less people consuming private healthcare.

Indirect effect is that if government increase consumption and/or decrease taxes it will increase its own deficit. Then the government needs to borrow in order to pay for the overspending. Added demand for credit drives up the the price of credit in the form of interest rates. As interest rates rise consumption and investment spending will fall.

Hot money is basically when capital markets are looking for the best interest rates in order to get a higher rate of return. Therefore an increase in interest rates will lead to more 'hot money' flowing into the country which would lead to an appreciation of the pound which is why interest rates cause exchange rates to rise.

CPI:Two surveys are done: Expenditure and Food Survey (what people buy) from a sample of 7000 households and a Price Survey on the basket of 650 most commonly used goods.The proportion of income spent on each item is used to ascertain weighting. For example if 10% in spent on food, then 10% of the weighting is assigned to food. The price changes are multiplied by the weights to give a price index. i.e if food goes up by 50p it's just 50 x 0.1 (since it's 10%). You don't need to write it in this much detail in the exam , but it's just so you understand.

Ahh thanks Can I use hot money as an evaluation for controlling inflation?
When interest rates rise, hot money will flow in this is bad for the current account of balance of payments as UK goods will be more expensive for foreigners etc?

Does anyone have any good evaluative points for competition policies, i.e. prioritization etc..?

Two questions:
Is there a significant difference between GDP and GNP?

Also what are the 3 components of HDI? I'm resitting and i think the components have updated since life expectancy, adult literacy rates and GDP per capita at PPP US$

Ahh yeah defo double evaluation woop
Are you talking about deregulation etc?

http://www.diffen.com/difference/GDP_vs_GNP

Also the HDI components are the same

guys can someone explain cost push and demand pull inflation?

How can they occur and what effect on economy?

Also what's better an appreciation of a currency/depreciation

22 hours before the exam and you're recommending we do all the past papers that exist for it?





(We did all of them weeks ago)

Cost push inflation means that theres rising inflation due to the AS curve being shifted to the left, whilst AD remains untouched. For example; Higher oil prices make a lot of companies have to up the prices of their products. Generally anything which makes the firm to pay more in terms of maitenence will cause this. Higher wages are the most common for multi choice i seen.

Demand pull is when the AD curve shifts to the right, whilst AS remains constant. Usually you will have to show the AD curve rising on the inelastic part of the keynes AS curve. Any + changes in the AD componenets will cause this. E.g. Higher Govt expenditure.
It is better to have demand pull because at least the economy experiences greater output to an extent, where as cost push leads to higher prices (inflation) and lower output.

Appreciation = Exchange rate goes up vice versa. How i remember it is if the Exchange rate goes up, Import goes up and Exports go down. - The E's never go up together !
Basically a low exchange rate is preferred as you can export more thus more money in the circular flow, though this depends on other factors like inflation.

Hope i helped!