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

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Original post by Praveen101
Both AD and AS can fall due to I falling and both can cause output and price levels to fall


Would this be considered evaluation if I said that the effect will be more significant in the long run run, as less investment will cause a reduction of productive capacity in the future leading to further reduction in real output?

And for KAA would a negative multiplier be accepted, e.g less investment less rounds of spending, thus AD falls further
Original post by nurav11
Huh no, this is right, it can work as a cause of decreased investment levels because it only said 'assess 2 likely factors of this change in investment'. So yeh, just saying interest rates are high does count as a factor towards decreased investment.

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The main reason was the fall in business confidence and the fall in consumer confidence in the context of UK being in a recession, interest rates didn't cause it
Original post by Praveen101
The main reason was the fall in business confidence and the fall in consumer confidence in the context of UK being in a recession, interest rates didn't cause it


So if I did not mention in context and explained high wages in the UK economy and high corporation tax may lead to a fall in investment, will I get 0 marks

both points were fully explained

Someone answer please otherwise ill get a heart attack from panic
(edited 8 years ago)
Original post by Praveen101
Both AD and AS can fall due to I falling and both can cause output and price levels to fall


Invesrment decrease and that causes ad to fall causing price level to fall and real output to fall. I did ad decreasing on graph. You could say do as decrease but it is up to you
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treeco
For question 2, regarding what factors contribute to a current account deficit I talked about the UK having a relatively low savings ratio in terms of the money set aside for retirement. When people retire they have less money and so buy imported goods that are cheaper, would this get 4 marks? My other point was the exchange rate, some Eurozone countries are uncompetitive so the pound appreciates etc etc
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as421
2
Ugh guys I answered question 1 on house prices and monetary policy because I had no idea what to write for the 4 marker on question 2 about investment at 2010 prices 😭
For the question 1 30 marker on demand side policy conflicts, I mentioned two conflicts (economic growth and inflation/ economic growth and income distribution) in depth and stated some other conflicts briefly that may occur as well within my analysis. Also evaluated them too..
How does that sound because I'm not feeling too confident.. Did anyone else do question 1? 😳


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as421
2
Original post by prepdream
Think it is enough. Data ref will give you 2 and extra information about MPC will give you 2.


Omg no I didn't mention QE 😭 I gave the 0.5% IR data reference and said that MPC makes interest rate decisions independently of the government and it's a demand side policy.. is that ok? 😳


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Original post by treeco
For question 2, regarding what factors contribute to a current account deficit I talked about the UK having a relatively low savings ratio in terms of the money set aside for retirement. When people retire they have less money and so buy imported goods that are cheaper, would this get 4 marks? My other point was the exchange rate, some Eurozone countries are uncompetitive so the pound appreciates etc etc


I said recession and low incomes abroad or exchange rate
Original post by Praveen101
Bro, the level of investment fell before the rate of interest fell from 0.5 to 5. They only reduced the rate of interest from 5 to 0.5 to encourage investment after it fell due to the recession however from 2008 it stayed relatively constant despite the lower interest rates. Therefore in this context it is completely wrong but as a general point it is correct. This is why you need a functioning knowledge about UK economic events.


Yeh this is all true but generally, in AS Economics, you only need the theory of policies to answer these questions. I agree with you that this didn't actually happen but if it asks you to 'assess likely factors of this change in investment' then it surely can be any factor no? I may be wrong but most of the questions don't require much contextual knowledge (I know this is obvious but it still counts) so you can generally get away with a lot.
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s16
Seems majority did question 2, that's good for those who did question 1 :smile:
(edited 8 years ago)
Original post by s16
Seems majority did question 2, that's good for those who did question 1 :smile:


Is it true that there are separate 'grade boundaries' for the harder question? Or the one that had a much higher mean average?
Original post by member1753327
Would this be considered evaluation if I said that the effect will be more significant in the long run run, as less investment will cause a reduction of productive capacity in the future leading to further reduction in real output?

And for KAA would a negative multiplier be accepted, e.g less investment less rounds of spending, thus AD falls further


Sounds alright!
For evaluation I said the level of investment is constantly fluctuating and used figure 1... Therefore anticipating any effects would be difficult
Also I'm not sure if this is good but I couldn't think of anything! But I said government spending would increase as it was a recession so 'automatic stabilisers' e.g. Jsa would increase as unemployment is likely to be high in a recession, therefore this may counteract the falle in ad by remaining the same or increasing... And I only drew the curve for Ad falling I'm soo annoyed I didn't draw it for the As curve! :-(
Original post by nurav11
Is it true that there are separate 'grade boundaries' for the harder question? Or the one that had a much higher mean average?


The question referred to a specific time period in a specific country therefore they won't give you the mark if its factually incorrect, i remember because i did a similar past paper and it didn't give marks for things that were general if they didnt happen, also they expect you to know atleast basic things about the IR levels
Original post by 09ekennedy
Sounds alright!
For evaluation I said the level of investment is constantly fluctuating and used figure 1... Therefore anticipating any effects would be difficult
Also I'm not sure if this is good but I couldn't think of anything! But I said government spending would increase as it was a recession so 'automatic stabilisers' e.g. Jsa would increase as unemployment is likely to be high in a recession, therefore this may counteract the falle in ad by remaining the same or increasing... And I only drew the curve for Ad falling I'm soo annoyed I didn't draw it for the As curve! :-(


I don't think they asked you to predict what would happen to future output and price levels with a fall in I but rather what happened in the past to output and price levels due to the fall in I after the recession so the eval wouldn't be valid
Original post by Praveen101
The question referred to a specific time period in a specific country therefore they won't give you the mark if its factually incorrect, i remember because i did a similar past paper and it didn't give marks for things that were general if they didnt happen, also they expect you to know atleast basic things about the IR levels


Ahh really?? Well wow, it's a lucky thing I put down investor confidence and high corporation tax which can work during a recession because I very nearly did put down interest rates.
Original post by member1753327
Would this be considered evaluation if I said that the effect will be more significant in the long run run, as less investment will cause a reduction of productive capacity in the future leading to further reduction in real output?

And for KAA would a negative multiplier be accepted, e.g less investment less rounds of spending, thus AD falls further


One thing, I'm not sure they accept 'negative multiplier' I think it has to be 'reverse multiplier' because you never can get a negative multiplier occurring since there is never a total loss of injections into the economy. However, you can say 'reverse' which just shows that levels of investment decreasing lead to a decreasing in the total amount of money that is multiplied, so the multiplier effect on AD is less and that allows AD to fall further, since this counterbalancing effect is no longer present. (Be very careful not to say the multiplier has fallen because that hasn't, since the MPC should be the same, it's just the amount of money BEING multiplied has fallen, leading to less of an increase on AD etc)

I'm sure though that they'll still credit the point as it is correct and anyway, you probably already got the 8 KAA marks anyway through 4 for the diagram, 2 for data and 2/4 for your first point KAA point so you should be fine :smile:
Original post by member1753327
Would this be considered evaluation if I said that the effect will be more significant in the long run run, as less investment will cause a reduction of productive capacity in the future leading to further reduction in real output?

And for KAA would a negative multiplier be accepted, e.g less investment less rounds of spending, thus AD falls further


Yes its called the negative multiplier effect and a fall in AD can cause a multiplied contraction in real GDP
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ioug
what did people put for the main components of the current account? Nurav?
Original post by as421
Omg no I didn't mention QE 😭 I gave the 0.5% IR data reference and said that MPC makes interest rate decisions independently of the government and it's a demand side policy.. is that ok? 😳


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Well, i think saying it is demand side policy gives you 2 marks and interest rates 2 marks. Date ref definitely 2 marks. Thats what I assume, so you get 4/4 for it :smile:
Btw, do you remember the 30 marker of Q1?
Original post by ioug
what did people put for the main components of the current account? Nurav?


Income (loans, dividends, interest payments from foreign services), current transfers, Trade of goods and trade of services + I defined current account.

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