AQA A2 Economics Unit 4 (23rd June 2016)

200/200

Hoping to repeat that this year but idk- I acc put in less work this year :/

WHOA. I got 165 . . . Ha. Hoping to bump it up to 184 with a retake of Unit 2!

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Do you guys think supply side policy may come up or Brexit?

WHOA. I got 165 . . . Ha. Hoping to bump it up to 184 with a retake of Unit 2!

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200/200

Hoping to repeat that this year but idk- I acc put in less work this year :/

JESUS CHRIST you must be insanely smart ..!!! Hats off to you though in all fairness .. That's amazing . I wish I could have done the same 😂🔫
How's revision going ? I guess it's a bit stupid even asking this question .. You're probably ahead of most people here lol


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How many pages do you guys manage to write for a 25 marker ?.. Like in these A2 papers ? I feel a lot more relaxed for timing ..


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Same I got 163.. And retaking unit 2... What ums did you get in it the first time round ? I did badly lmao .. So hoping for a higher A


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I got 81 the first time around. You?

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I got 80 lol... Got any predictions of what's likely to turn up on Monday ?


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Honestly, not a clue. You? I'm not looking forward to the multiple choice either . . .

How come ? Don't you find it easier this year ?.. It's all repeat you'll be fine


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I always get atrocious scores on MCQ. I just got 15, I don't know why I'm so bad at it but I do atrociously every time!

could somebody please explain how quantitative easing works ... in enough detail for an exam lol ? If theres one thing in macro that for some odd reason never makes sense to me .. its this ^
thanks

Basically, Quantitative easing is when the central bank (be that Bank of England or the Federal Reserve) creates funds electronically and uses it to buy government/corporate bonds. It has 2 main effects:

1) Higher demand for bond raises bond/share/asset prices. This induces the wealth effect where consumers feel that they can afford greater loans/leverage, thus increasing borrowing and spending, which stimulates AD and national output.

2) Increases capital reserves of commercial banks + financial institutions (who sell the bonds)- therefore increasing liquidity -->their willingness to lend, and also as the supply of money increases, interest rates fall, thus increasing lending + investment-->also raising AD. However...this may not apply during a deep recession or financial crisis (e.g. in 2008) as the economy may be caught in a liquidity trap where banks attempting to protect their profit margins refuse to pass on lower rates.

3) Exchange rate: this is a comparatively weaker link though still makes sense--> Quantitative easing pushing down market interest rates reduces the incentive to deposit money in UK banks, thus leading to capital flight and a depreciation of the pound-->increases export competitiveness-->higher national income

Hope this helps!

Hi

thank you that helped to make a lot more sense, however one argument for using QE being that its a good alternative to lowering interest rates because of the liquidity trap doesnt make sense to me... because essentially through the process of QE you're achieving the exact same thing aka- lower interest rates to boost lending and consumption? so how does the argument work exactly.

Ok, so there's actually this huge confusion about what we mean when we say 'interest rate'. What you actually mean is when the central bank lowers BANK RATE' (which is the rate of interest that it charges commercial banks to borrow funds from the central bank/deposit reserves). Note: this is different to the MARKET interest rates which are the returns on bonds/stocks/deposits in financial markets.

So, back to the argument- some people believe that just by lowering the BANK RATE would not translate into lower MARKET RATES due to a liquidity trap (simply because commercial banks hope to protect their profit margins)--> QE would help to push up asset/bond prices (in the market) DIRECTLY and lower the yield (which is the interest on these assets).

HOWEVER... the idea of the liquidity trap still applies + hinders channel number (2) that I mentioned above--> i.e. although commercial banks see their reserves increase--> still comparatively unwilling to lower rates further

So all in one, the simple answer is: QE an additional boost DIRECTLY into the market whereas the bank rate has to go through the whole transmission mechanism + is seen as sort of like a 'last resort' to boosting the economy.

Hope I didn't confuse you even more ahahah - But tbh at this stage, you're really not expected to know it in that amount of detail!

Lmao you explain economics better than my teacher 😂🔫no wonder you got full UMS . I thought I was smart
In economics ... Not until you meet people on the studentroom LOL. Anyway thank you very much !


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