AQA Economics Unit 4 11th June 2013

That seems like it would be a unit 2 question.



However, use the Phillips Curve - as unemployment falls, inflation rises, expectation of inflation/cost of living means that workers big up their wages in real terms - so the rate of inflation becomes embedded in the standard wage, unemployment falls back to NAIRU and so forth, leading to spiraling wage costs and inflation. (Draw Graph)


Also, don't draw too many graphs, 2-3 is fine. I think you only get marks for 2 so make sure they're good, and if you can, make them unit 4 graphs. Remember, graphs are easy marks! =]

Mind explaining the NAIRU point? Dont think my teachers have covered that. Btw, are you taking this next month as well?

guys does anyone know how you could answer this question?

Extract B (lines 40-42) suggests that the US and the UK may be ‘very concerned for
their macroeconomic performance’ if free trade agreements lead to greater openness of
their economies.
Using the data and your economic knowledge, assess the possible impact on the UK
economy of greater openness to world markets. (25 marks)

I really do not know the pros and cons of protectionism and free trade? I just know the basics like comparative advantage and how to draw tariff diagram but cannot explain it!

Your ideas would be of much use!
Regards

I was just thinking because the way you explain it is that it begins when inflation is at 0% no? Then, to model the relationship between inflation and unemployment, you say aggregate demand increases, which leads to lower unemployment by higher inflation and you explain why...

How else would you show the relationship between the two if it weren't demand-pull inflation in the first place? Cost-push inflation increases unemployment... i.e. the shift to the left of the AS curve.

Otherwise, could you please analyse how any other type of inflation i.e. cost-push leads to an increase decrease in unemployment, and use it to explain the Phillips Curve.

Thanks =]

I think your argument of 'demand pull' inflation is based on the logic of: firms hiring more workers, wages increases, demand increases, hence inflation.

That's fine, but how about this way: firms hiring more workers, labour cost increases, profit decreases, firms [have to] increase prices to keep their profit margin constant, hence inflation. I suppose you can call this Cost-push inflation, but I personally wouldn't do that to confuse myself.

Note that when I say firms hiring more workers, it means unemployment is at a LOWER rate.
Don't confuse a 'lower rate of unemployment' with a REDUCTION of unemployment. The Phillips curve doesn't show an shift in unemployment (therefore there is no reduction or increase), it only shows the RELATIONSHIP, ie: what the inflation would be if unemployment is at A, what it would be when inflation at B.
In a way, it's similar to the Demand curve alone, just show the relationship between price and output. You can't call it a shift because there is only one curve on the graph.

Hopefully I haven't confused you to death...... if I have, blame Economics!

Hi
Could you please post the unit 3 2013 jan paper?

not looking forward to this exam.. especially after my unit 2 resit and how meh the paper was!

Did the Unit 2 resit to.. did you do context2?

Yeah the one about balance of payments? Couldn't do anything to do with growth and real incomes!

yeah through the first one was quite hard...really hope I did well.. u doing unit 4 in june

qr95.. I got 95/100 in Unit 1, 85/100 in Unit 2 and 100/100 in Unit 3, but I am really really scared about this exam.. I just feel like I need to know everything that tiny bit more but my other exams are taking over! Not long to go now, good luck everyone

Not sure if anyone is interested but tutor2u have highlighted topics that they believe at least one will show up

The consequences for the UK economy should the US economy experience a double-dip recession
The economic consequences for the UK of natural disasters such as flood, drought, tsunami (external shocks) and economics of global price volatility
The fast-changing role of the Chinese economy and its implications for the UK
The impact on the UK economy of major instability of the euro
The impact on the UK economy of the newer membership of the EU