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A2 OCR Economics F585 June 2016

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Reply 640

MrCoolVille

Can someone tell me the structure to the 6 and 10 marks compared to the 20 mark question? Thanks

Reply 641

Pato1

can someone tell me the relationship between growth and development?

Reply 642

Pato1

Original post by MrCoolVille

Can someone tell me the structure to the 6 and 10 marks compared to the 20 mark question? Thanks

6 Markers:
Point (1)
Explain the point with economic theory (1)
Consequence (1)

Do this twice

10 Markers (Mini essay)
L1 Define (2)
L2/3: Point + Deep analysis backed up with theory (4) Do once [can use diagram]
L4: Evaluation; on the other hand, however, depends on. (4) Do twice.
Judgement (MUST) Give overall judgement and justify why.

20 Mark is the same but much more analysis and do 2 for and 2 against

Reply 643

Breeves8

Ash Barton is a ******

Reply 644

Pato1

With reference to Extract 3, comment on the importance of Zambia’s terms of trade for itsfuture economic performance

Terms of trade can be defined as the relationship between the price of a country’s exports, and of itsimports. If the terms of trade change - for example - export prices are rising faster than import prices(or falling less rapidly than import prices), then there has been a favourable movement in the terms oftrade. This is because, in effect, it now receives more imports for each unit of goods exported.

Fig. 3.2 shows a trend towards an improvement in Zambia’s terms of trade, although there appears tobe a short-term deterioration between 2006 and 2009, and after 2011. Given the fact that around threequarters of Zambia’s export revenue comes from copper, then the trend in the country’s terms of trademainly reflects movements in the price of copper relative to the price of Zambian imports. Zambia isclearly a country with an excessive reliance on copper for its foreign exchange earnings and, therefore,slight changes in the price of this single commodity can have a dramatic impact on Zambia’s economicperformance.

An improvement in the terms of trade makes Zambia’s exports relatively more expensive in worldmarkets. This has both positive and negative consequences. It means that a given quantity of exportsbrings in more foreign revenue to buy a larger volume of imports. However, the rise in relative price ofZambia’s exports might lead to a contraction of demand. On the other hand, if demand for Zambianexports is price inelastic, then the country will benefit from the rise in relative prices more than it suffersfrom any fall off in demand. The improvement in Zambia’s terms of trade will have led to a net increase in foreign revenue earnings,leading to an inflow of foreign exchange currency. This is especially welcomed by developing countrieswhose growth and development is often constrained, not just by the lack of funds for investment, butalso by a lack of foreign exchange currency which is needed to purchase much needed capital goods. An improvement in Zambia’s terms of trade should lead to an improvement in living standards. This isbecause an increase in foreign earnings will lead to a rise in income for the country’s inhabitants as wellas a rise in tax receipts, thus facilitating increased government spending on the infrastructure and onhealthcare and education. Unfortunately, for Zambia (as we are told in Extract 3), copper exports (onwhich the country relies) only contribute 10% of government tax receipts.

A final way in which an improvement in the terms of trade benefits the Zambian economy is through thestimulation of investment. Higher profits from copper mining and higher foreign exchange earnings willprovide an incentive for more investment in Zambia, thus generating - through the multiplier - anincreased rate of economic growth. However, significant improvements in economic performance from an improvement in Zambia’s termsof trade depend mainly on an increase of foreign earnings. Demand for some of Zambia’s exports willbe price elastic, and in those circumstances export revenue from these products will fall. Hence theoverall impact on export earnings will depend on the “net” elasticity across all of Zambia’s exports.Furthermore, if the improvement in the terms of trade is derived from a reduction in import prices thenthis could lead to lower inflation, lower interest rates, and higher living standards, making Zambia arelatively more attractive place to save and invest. The impact on the Balance of Payments woulddepend on overall price elasticity of demand for all the goods and services involved.

Finally, while the terms of trade clearly can have an impact on economic performance, this performancealso depends, more significantly, on the Zambian government’s ability to introduce and manage policiesthat will improve the overall competiveness of the economy. As with many low / middle incomecountries, these are likely to centre on improvements in health, education and infrastructure, and this,among other things, can most significantly deliver sustainable improvements in the terms of tradethrough the exporting of goods and services with more added value.

Reply 645

User57

Does an increase in productive efficiency increase LRAS?

Reply 646

Berke0

Original post by Pato1

can someone tell me the relationship between growth and development?

As development objectives are met (health incomes/education standards) human capital increases, increasing occupational mobility of labour meaning that economy will be more resilient in the face of shocks as workers more flexible. Quality quantity of FOP etc idk lol

Reply 647

Pato1

Original post by User57

Does an increase in productive efficiency increase LRAS?

yes

Reply 648

Pato1

can someone quickly tell me the difference between public sector consumption public gross capital formation

Reply 649

nnenna okwara

For a reduction in import tarrifs, is the diagram meant to show a complete removal of an import tarrif or a reduction in the actual tarrif imposed

Reply 650

politicalmind

Guys whats this thing about external and internal sector?!

Reply 651

Pato1

Original post by nnenna okwara

For a reduction in import tarrifs, is the diagram meant to show a complete removal of an import tarrif or a reduction in the actual tarrif imposed

reductiom
n

Reply 652

flairs

Original post by Pato1

There is no need for judgement on 10 marker - just two developed points. Look at recent mark schemes

Reply 653

Lostrider

Are indicators of and factors promoting globalisation the same thing??

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Reply 654

Lostrider

Original post by Pato1

can someone quickly tell me the difference between public sector consumption public gross capital formation

I know that public gross capital formation is investment by the government?

But I actually have no idea what public sector consumption is. I feel like it's just consumption in the public sector like school or whatever, but that doesn't sound right :/

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Reply 655

MrCoolVille

Are you nearly 100% sure that the 20 marker will be on supply side reforms. How would you go about doing that essay? Thanks

Reply 656

zombaldia

Original post by MrCoolVille

Are you nearly 100% sure that the 20 marker will be on supply side reforms. How would you go about doing that essay? Thanks

Sellotape £20 onto paper with smiley face

Reply 657

Lostrider

Original post by MrCoolVille

Are you nearly 100% sure that the 20 marker will be on supply side reforms. How would you go about doing that essay? Thanks

Define SS policies, economic growth etc.
● deregulation
● spend on infrastructure
● growth in economic zones
● expenditure on education

■ costly
■ resource nationalisation undermines it

Judgement: SS policies are needed to... could be used with expansionary monetary etc

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Reply 658

mmmmmaddy

Original post by Lostrider

You're right- the public sector consumption looks at the total value of the public goods and services that people consume. So it includes education, healthcare etc