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Edexcel AS Economics Unit 2 (19th May 2015) - Managing the Economy Exam Thread

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Could someone give a brief overview of the transmission mechanism please?

That is too general. But I will give you an example of how it looks like:
Decrease in interest rates -> lower incentive to save to saving decreases. As Y=C+S, as S decreases, Consumption increases. AD=C+I+G+X-Z, C increases mean AD increases, shifting outwards. Thus unemployment increases.
The example above is one example of transmission mechanism in monetary policy. Basically, you have to explain in details how this factor leads to this factor and leads to this factor.

Reply 61

falloutboyyy

Someone please explain automatic stabilisers

Posted from TSR Mobile

Reply 62

prepdream

Original post by falloutboyyy

Someone please explain automatic stabilisers

Posted from TSR Mobile

Is that in the specification?

Reply 63

ISandles

Original post by prepdream

Is that in the specification?

Not from what I've seen no...

Reply 64

prepdream

Original post by ISandles

Not from what I've seen no...

Phew. I revised according to the specification and when I saw it, I totally went panicked a few minutes thinking I missed something.
Also, do you any suggestion for a conplete list of definitions?

Reply 65

ISandles

Original post by prepdream

Phew. I revised according to the specification and when I saw it, I totally went panicked a few minutes thinking I missed something.
Also, do you any suggestion for a conplete list of definitions?

If you go to the first post I created, the official Edexcel revision sheets link have definitions of all the terms in the Macro course. I think it starts from page 46.

any predictions?

Do you guys have your exam in the am?

Reply 68

ISandles

Original post by havok121

Do you guys have your exam in the am?

Nah, think everyone has a pm exam...and lucky me has a physics exam in the am on tuesday :I

Reply 69

Smithh98

Original post by ISandles

Nah, think everyone has a pm exam...and lucky me has a physics exam in the am on tuesday :I

I have physics on Tuesday as well, I haven't done a single hour of revision for it though, whereas economics I have done loads!!

Reply 70

ISandles

Original post by Smithh98

I have physics on Tuesday as well, I haven't done a single hour of revision for it though, whereas economics I have done loads!!

More than me my friend...

Reply 71

member1753327

Looking for someone to help me and expand on these

Understand how economicgrowth is measured and itslimitations, for example: the inadequacy of economicgrowth measurement as ameasure of standards of living problems of comparisonbetween developed anddeveloping countries.

Reply 72

Hortonn

Could someone explain to me what PPP is? I seriously don't get it

Reply 73

Smithh98

Original post by member1753327

Looking for someone to help me and expand on theseUnderstand how economicgrowth is measured and itslimitations, for example: the inadequacy of economicgrowth measurement as ameasure of standards of living problems of comparisonbetween developed anddeveloping countries.

Economic growth is generally measured as a percentage change in real GDP (or output).

The main limitations the examiners want to read is about how it doesn't take into account income inequality, so the standards of living may be relatively poor for a country even if it has a high GDP because the richest people in that country have a disproportionate percentage of money compared to the poorest. But you could also mention how that with economic growth there will be negative externalities such as pollution or road congestion.

Reply 74

prepdream

Original post by Hortonn

Could someone explain to me what PPP is? I seriously don't get it

PPP is used to compare GDP of two countries together. The exchange rate of two currencies will be at equilibrium if the dosmestic purchase at that exchange rate is equivalent in two countries.

An example from tutor2u:
The data above is taken from Big Mac Index data for January 2012.

•

The baseline data finds that a Big Mac costs an average of $4.20 in the United States and 3,700 South Korean won.

•

If actual exchange rates were at their implied PPP levels, then the South Korean – US dollar exchange rate would be $1 = Won 882.

Reply 75

nnemo

Hi
just wanted to ask what would you say for a question like this ?
evaluvate macroeconomic policies used to reduce unemployment without increasing inflation.

Reply 76

nnemo

Sorry for tons of questions
But these are all prediction so theres no markscheme .
What would tou say for
Assess the policies used to prevent proce deflation in the uk
I would say , increase ad by reducing inome tax/vat
Increase interest rates
Increase employment by investing in labour markets , so more individuals have more diposable income to apend .
But how would you evaluvate this question?

Reply 77

member1753327

Original post by nnemo

Increase interest rates, lower spending, lower investment, less AD leading to deflation, thus incorrect.

EVAL

However the increase in employment depends on the magnitude of the funds spent by the government, if the government invested little funds, an increase in employment will be un significant, thus AD will increase by little. Regarding interest rates to increase investment, if business confidence e.g due to a fear of a global recession, firms may not want to invest even if corp tax is lower and if borrowing becomes cheaper.

Reply 78

member1753327

Original post by nnemo

Hi
just wanted to ask what would you say for a question like this ?
evaluvate macroeconomic policies used to reduce unemployment without increasing inflation.

Firstly, by reducing unemployment inflation will rise all the time
(depends on capacity in the economy, EVAL)

Are you thinking of supply side policies, used to shift aggregate supply to the right?

Reply 79

Immakabiri

im so confused about the difference of long run and short run aggregate supply? is long run when it shifts to the right? and short run where it would be normally? also anyone know how to structure the questions for the different marks available? would i need graphs for every question?

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