Economics Unit 2 Edexcel - Managing the UK economy Tuesday 19th May 2015 (PM)

AJC1997

This is what I wrote for the 30 markers in Q2, which was also what most of my friends did. Take this for consideration only.

Define supply side policy.
Few arguments:
1. Cut benefits -> create incentive to find jobs -> more work -> output increase
2. Cut income tax -> create incentive to work for workers -> productivity increase -> output increase
3. Cut corporation tax -> more investment -> technology, efficiency etc -> output increase
4. Training and education -> skills goes up -> more output.

Evaluation: time lag, quality of training, other factors cancelling out, firms may not invest but will keep it for themselves, other way to increase real output ( I referred to other policies, fiscal and monetary to compare, that kind of stuff).

Hope this helps.

exactly, I mentioned all of these but instead of cutting benefits I used Privatisation and Deregulation which I think are strong supply side policies especially for increasing real output

Reply 681

Rigster122

3

Original post by dripper

that was you? loved it

YAY!

Reply 682

Tommy97

1

Original post by Praveen101

You're going to get 0 for AA and evaluation as the only way you can mention subsidies is by them subsiding education, other forms of subsidies cant be used e.g to farmers as this doesn't increase productivity just output , the mark scheme never awards for simply subsidies and textbooks advise against using it.

Oh my god. Is that really true? ****ing hell. I've never Heard that before . Been a year since doing it and just ****

Reply 683

Mowtoe

2

Original post by Cate12345

Can anyone briefly say the question 1 questions??? And if possible the marks too. Just brief cause can't remeber 😓

the first one was on saving ratio
and i can vaguely remember the rest
effect of budget deficit on circular flow of income
benefits of low/stable inflation
analyse monetary policy
reasons why they didn't change the interest rate
the 30 marker was demand-side policies conflicting with macroeconomic objectives

Reply 684

member1753327

11

Original post by Praveen101

Since it was 12 marks it would be 8 marks for KAA and 4 marks for eval

8 KAA

Diagram showing both the AS (1) and AD(1) falling (4 for being correct overall)

Then explanation about why AD falls (2)

And why AS falls (AD)

4 eval (2x2 or one for 4)

e.g I is a small component of AD, other components of AD

I said in the long run productive capacity would be affected, thus in the future real output will fall significantly

Also I talked about elasticity of AS curve e.g spare capacity

will I get eval marks??

Reply 685

Trungb96

Original post by Tommy97

Oh my god. Is that really true? ****ing hell. I've never Heard that before . Been a year since doing it and just ****

My teacher always tell me to avoid writing about subsidies as much as possible, as it's not applicable to the UK or any developed countries since there aren't that much subsidies in real life. In the UK there's barely any subsidies, maybe some for agricutural business

Reply 686

badaman

2

'To what extent do demand side policies lead to conflicts between macroeconomic objectives'' (30 marks)
Things they considered before keeping interest rate the same.
Benefits of low inflation.
What does a budget deficit do to the circular flow of income.
What is meant by ''monetary policy''?

Reply 687

jimbo1234567890

2

Original post by Mowtoe

the first one was on saving ratio
and i can vaguely remember the rest
effect of budget deficit on circular flow of income
benefits of low/stable inflation
analyse monetary policy
reasons why they didn't change the interest rate
the 30 marker was demand-side policies conflicting with macroeconomic objectives

so you read with aswell, thats what i wrote but alot of people are saying it said between when im sure it sed with marco objectives

Reply 688

Praveen101

2

Original post by kylemiller

for the productivity question, i put as the productivity decreased, firms have to hire more workers. therefore, the cost of production might increase and results in inflation.
is it right?

Well logically, a firm wouldn't do that would they, if a Tyre fitter in a garage was inefficient they wouldn't hire more Tyre fitters, they would pass on the increase in prices to consumer directly or they would substitute with more efficient capital leading to unemployment, you could have gone directly to for final point but hopefully examiners will overlook it

Reply 689

Darcy1

12

Original post by Trungb96

This is what I wrote for the 30 markers in Q2, which was also what most of my friends did. Take this for consideration only.

Define supply side policy.
Few arguments:
1. Cut benefits -> create incentive to find jobs -> more work -> output increase
2. Cut income tax -> create incentive to work for workers -> productivity increase -> output increase
3. Cut corporation tax -> more investment -> technology, efficiency etc -> output increase
4. Training and education -> skills goes up -> more output.

Evaluation: time lag, quality of training, other factors cancelling out, firms may not invest but will keep it for themselves, other way to increase real output ( I referred to other policies, fiscal and monetary to compare, that kind of stuff).

Hope this helps.

Aren't cutting income tax and benefits fiscal policy while the question was about supply side? I wrote about training and education like you but also I did subsidies for firms and investment into infastructure

Reply 690

Praveen101

2

Original post by member1753327

I said in the long run productive capacity would be affected, thus in the future real output will fall significantly

Also I talked about elasticity of AS curve e.g spare capacity

will I get eval marks??

If you said a rise in AD will cause price levels to rise, yes than you can evaluate about the level of spare capacity however if you just mentioned that real output will rise because of AD rising but not mention prices rising then itll make little sense

Reply 691

Tommy 97

3

Original post by Trungb96

My teacher always tell me to avoid writing about subsidies as much as possible, as it's not applicable to the UK or any developed countries since there aren't that much subsidies in real life. In the UK there's barely any subsidies, maybe some for agricutural business

Honestly feel awful now, can someone possibly link me to a mark scheme with a similar question? I don't know any examples

Reply 692

Trungb96

Original post by Darcy1

Aren't cutting income tax and benefits fiscal policy while the question was about supply side? I wrote about training and education like you but also I did subsidies for firms and investment into infastructure

Actually it is and it isn't, these two can be argued for both side of policy. You can say they keep more disposable income, therefore they can afford to spend more ( demand side policy) or you can argue it the way I did :biggrin:

Reply 693

nurav11

2

Original post by AJC1997

exactly, I mentioned all of these but instead of cutting benefits I used Privatisation and Deregulation which I think are strong supply side policies especially for increasing real output

I used Privatisation, Education/training and raising of retirement age/lowering minimum working age which I've always quite liked as a point to increase amount of workers which firms can now hire, increasing output. :tongue:

Reply 694

member1753327

11

Original post by Praveen101

If you said a rise in AD will cause price levels to rise, yes than you can evaluate about the level of spare capacity however if you just mentioned that real output will rise because of AD rising but not mention prices rising then itll make little sense

Actually real output and price level fell

Reply 695

Leking9

11

1d.) ''To what extent do demand side policies lead to conflicts between macroeconomic objectives'' (30 marks)

This is how I structured it:

I mentioned a macroeconomic objective in each paragraph, stated HOW a fiscal/monetary policy would help achieve it & then I stated how/why that objective would conflict with the initial objective. Then I obviously evaluated

(edited 8 years ago)

Reply 696

Mowtoe

2

Original post by jimbo1234567890

so you read with aswell, thats what i wrote but alot of people are saying it said between when im sure it sed with marco objectives

it was definitely with

Reply 697

Praveen101

2

Original post by Darcy1

Aren't cutting income tax and benefits fiscal policy while the question was about supply side? I wrote about training and education like you but also I did subsidies for firms and investment into infastructure

Fiscal policies and supply side policies overall , in your example it self the government spending on education is infact Government expenditure is it not and therefore an expansionary fiscal policy. aswell as a supply side policy.

KAA 18Up to 6 marks (3 x 2 marks):
• Defining supply side policies as measures by the government toincrease productive capacity of the economy OR increase LRAS• Defining economic growth as an increase in either real OR potentialGDP• Use of relevant data (e.g. data on corporation tax rates from Extract2 and/or Figure 2)• Use of a production possibility frontier diagram to demonstrategrowth through SSP OR use of an AD/AS diagram to demonstrategrowth through SSP

Policies might include (up to 12 marks):
Corporation tax reductions (1 x 4 marks or 1 x 6 marks)
• increasing investment/productivity or attraction of overseasinvestment and link to economic growthOther SSP (2 x 4 marks or 1 x 6 marks) - 2 marks for identification of policyand up to 4 marks for link to economic growth• Increased or improved education• Increased and improved training• Increased or improved health care• Changing the level of benefits to incentivise employment• Reducing income tax to incentivise employment• Cutting cost of bureaucracy / increased deregulation• Privatisation of an industry such as Royal Mail, which may lead toincreased competition, innovation and efficiency• Infrastructure investment such as roads or broadband, reducingindustries' costs or improving access to market• Increased flexibility and/or mobility of labour market, e.g. reducetrade union power / improved information flows / reduce or abolishnational minimum wage

Evaluation of other supply side policies (up to 1 x 6 marks or 2 x 4 marks)
• Time it takes for supply side policies to take effect• Privatisation may lead to private monopolies and less efficiency andlower economic growth• Cut in income tax designed as an incentive to work and invest may beineffective if workers use it as an opportunity to work less for the(30)same income• The actions of other countries also trying to attract investment• Increase in UK taxation elsewhere may have an effect on incentives• Supply side policies ineffective if AD is very low• Elasticity of AD curve• Magnitude of policy changes.
• Cut in corporation tax ineffective if companies use the cut to boostdividend payments / retained profits rather than for investment• Interest rates / confidence may affect investment more thancorporation tax rates (questioning ceteris paribus)• Positive or negative comparison to other countries' corporation taxrates