OCR F581 Markets in Action - 11 May 2015

hey guys! hope revision is going well!
so ive pretty much done all the past papers and really want a look at last years paper. is it possible to obtain this?

Reply 82

Anyone have access to june 2014 papers..really wanna look at them for revision - ive done all the other past papers
thanks

Reply 83

Original post by Yousf

But when there is a high inflation, the MPC increases interest rates to reach the inflation target of 2 percent. When interest rate increases this causes the reward for saving in that particular country to increase, eg UK. Thus, foreign firms transfer their money to the UK, due to the higher reward, this causes an appreciation in the exchange rate, as the demand for the currency increases causing the exchange rate to rise.

Then later on, as you said we would expect the exchange rate decreases making it long term.. Also if there was an appreication in the exchange rate, it would be able to buy more goods and services abroad cheaply due to the stronger currency even though that's not entirely favorable.

You're right about how the Monetary Policy Committee's decision to raise interest rates would cause hot money flows into the country, but I wouldn't say that the whole chain of events is market-based and "automatic", if you like. The committee has to intervene, so the appreciation isn't really as a result of inflation, it's as a result of increased interest rates - which aren't inherently caused by inflation.

Reply 84

Anyone seen/got the june 2014 paper?

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Reply 85

Makashima

Original post by Gladiatorsword

Anyone seen/got the june 2014 paper?

Posted from TSR Mobile

Ive seen it but dont have it?

Reply 86

Original post by Makashima

Ive seen it but dont have it?

Where did u see it?

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Reply 87

Original post by Gladiatorsword

Where did u see it?

Posted from TSR Mobile

Are you trying to cheat on your Mocks or something?

Reply 88

Anyone care to explain about the whole de-industrialisation aspect that specialisation brings?

Reply 89

Also are there any disadvantages of division of labour.

For advantages is just that is is cheaper - not sure why and it increases productivity.

Reply 90

Original post by Super199

Anyone care to explain about the whole de-industrialisation aspect that specialisation brings?

Not sure about why specialisation would necessarily bring about de-industrialisation in general, but in the case of the UK:

•

UK specialised in services rather than goods

•

Factories closed down

•

De-industrialisation

•

Structural unemployment as a result.

If you find out why it's (supposedly) true all of the time, please do tell me as I'm not sure why it would.

Original post by Super199

Also are there any disadvantages of division of labour.

For advantages is just that is is cheaper - not sure why and it increases productivity.

Division of labour is cheaper because of the increased productivity - if workers are more productive, then they can produce the same quantity of goods/services in less time, meaning the firm has to pay lower wages and therefore has lower fixed costs.

However, as to disadvantages, there's the chance that the workers may become demotivated and bored as a result of repetitive tasks and the lack of job enrichment/job enlargement.

Reply 91

Original post by Wall Street

Not sure about why specialisation would necessarily bring about de-industrialisation in general, but in the case of the UK:

•

UK specialised in services rather than goods

•

Factories closed down

•

De-industrialisation

•

Structural unemployment as a result.

If you find out why it's (supposedly) true all of the time, please do tell me as I'm not sure why it would.

Division of labour is cheaper because of the increased productivity - if workers are more productive, then they can produce the same quantity of goods/services in less time, meaning the firm has to pay lower wages and therefore has lower fixed costs.

However, as to disadvantages, there's the chance that the workers may become demotivated and bored as a result of repetitive tasks and the lack of job enrichment/job enlargement.

Thank you for this :smile:

Another thing how does specialisation increase the variety of goods? Also do you mind listing the advantages just in case I miss one :smile:

Thanks

Reply 92

Original post by Super199

Thank you for this :smile:

Another thing how does specialisation increase the variety of goods? Also do you mind listing the advantages just in case I miss one :smile:

Thanks

No worries - it's good revision for me too - so if you have any questions feel free to ask!

I'm not sure why specialisation increases in the variety of goods, as I believe it would decrease the variety in the domestic country, but I'll have a look in my textbook later/tomorrow and get back to you on that.

The main advantages of specialisation are that it raises productivity (therefore reducing costs); causes a shift of the PPC and causes economic growth (through an increase in real GDP). Then you can go on to talk about the other benefits that result for these three, such as a chain of analysis such as this:

Causes a shift right of the AS curve

Causes an increase in real GDP (causes both short-run and, more importantly, long-run economic growth)

Reduces unemployment

Helps to improve the budget balance as there is more tax revenue and less welfare transfer payments

Means the government can increase spending on public goods/services, such as infrastructure/education/health

This will cause further economic growth (through the multiplier, as government spending is a component of AD) and higher standards of living

Reply 93

Original post by Yousf

Hey i was doing a past paper, and i noticed in the past paper it said this,

'An increase in saving may increase funds availablefor investment'

What does this mean?

A bit of a late reply, but oh well: the funds for investment have to come from either a firm's savings or profits. Since it is not a given that a firm will make a profit in the future, a good way to guarantee investment funds is through saving now - which means that not only do you get the original sum you saved, but you also get interest.

However, it's true that if a firm isn't making profit, then it's unlikely to invest as that would be uneconomical, but savings are the main source of investment funding nonetheless.

Reply 94

Original post by Wall Street

Causes a shift right of the AS curve

Causes an increase in real GDP (causes both short-run and, more importantly, long-run economic growth)

Reduces unemployment

Helps to improve the budget balance as there is more tax revenue and less welfare transfer payments

Means the government can increase spending on public goods/services, such as infrastructure/education/health

This will cause further economic growth (through the multiplier, as government spending is a component of AD) and higher standards of living

Another question.

To do with PPFs/PPCs.

What do you have to know about them.

PPF shows the maximum quantity of two goods with the current resources and technology. The one that is curved is due to there not being equal substitution of the goods I think?

If you are on the curve you are being efficient. Specifically allocative efficient, productive efficient and you are at your maximum productive potential?

If you are at a point inside you are being inefficient meaning there are under employed resources mainly which are labour.

A point outside represents scarcity and cannot be achieved unless there is a shift in the PPF.

When you move from a point that does more of Good A to good B, you are moving from an area of specialisation. Can you possibly help me with this bit. My teacher said something to do with the law of diminishing returns.

Also what causes the PPF to shift is is just an increase in the quantity of the factors of production? Is there other things that cause it to shift such as you said specialisation would?

Is there anything else I need to know about PPFs?

Reply 95

Original post by Super199

Another question.

To do with PPFs/PPCs.

What do you have to know about them.

1. PPF shows the maximum quantity of two goods with the current resources and technology. The one that is curved is due to there not being equal substitution of the goods I think?

2. If you are on the curve you are being efficient. Specifically allocative efficient, productive efficient and you are at your maximum productive potential?

3. If you are at a point inside you are being inefficient meaning there are under employed resources mainly which are labour.

4. A point outside represents scarcity and cannot be achieved unless there is a shift in the PPF.

5. When you move from a point that does more of Good A to good B, you are moving from an area of specialisation. Can you possibly help me with this bit. My teacher said something to do with the law of diminishing returns.

6. Also what causes the PPF to shift is is just an increase in the quantity of the factors of production? Is there other things that cause it to shift such as you said specialisation would?

Is there anything else I need to know about PPFs?

1. The PPF/PPC (they're both the same thing) does show the maximum quantity of a combination of two goods/services that can be produced with current resources/technology, yes. The reason it is curved is due to the law of diminishing returns (see point 5).

2. If you are on the curve, you are only being productively efficient - you may or may not be allocatively efficient as it depends on what goods and services you're choosing to prioritise. Whether or not you're allocatively efficient depends on how your production levels align with what consumers need/want.

3. Yes, although factors of production other than labour are just as likely to be unemployed, although less serious consequences result from that (as they do not cause unemployment, which is detrimental to the economy).

4. It is possible to have a positive output gap (where you are outside your PPC) if you're over-utilising resources - for example, if people are working overtime - but this is extremely unlikely in reality.

5. You're correct in thinking that a movement along the PPC is a change in what you specialise in. However, the law of diminishing returns has more to do with why the PPC is curved than with "moving from an area of specialisation", as it explains why the edges of the PPC are more steep than the centre. I'd suggest looking at this, as it's quite hard to explain why.

6. Specialisation causes an increase in the quality of labour, which is a factor of production - therefore, only a change in the quality/quantity of factors of production (land, labour, capital and entrepreneurship remember) causes a shift in the PPC.

Hope this helped and let me know if you have any other questions!

Reply 96