AQA A-level Economics new 7136 - 06, 13 & 19 Jun 2017 [Exam Discussion]

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I picked a few questions; if everyone tries to answer them we can collate it eventually into a model answer! And ill do this every few days I think (unless you don't like this idea xD)

Explain how both the Bank of England and privately owned banks create money / credit (9m) (aqa textbook)

To what extent if all should developed countries such as the UK be concerned about a significant strengthening of the economic importance of MENA countries (Middle Eastern and North African) in the global economy? June 2013 unit 4 q3 (25 Marks) (it's a data response but you can always do your own research :wink:

and no peeking at the ms!)

I thought these are probably two units that noone likes :colondollar:

answer away and dont be afraid even if you think you are wrong.

I'll probably attempt answering them tomorrow night, I need to revise for a mock tomorrow.

Omg I hate that 9 marker. I deliberately temporarily (possibly permanently) skipped that out of my revision... :colondollar:

Reply 61

Nadine_08

I have a question but it might be kinda stupid...

Say we didn't revise enough for the exam and for the 25 marker, depended almost entirely on the data/item given, how bad would the answer be?

You don't have to answer if it's a ridiculous question... :colondollar:

Reply 62

physicsamor

Original post by Nadine_08

I'm no examiner but I still think you can do really well or sufficiently if you are able to manipulate the data that's exactly what they are looking for. Like for one of my mocks I literally ran out of ideas so I took things from the data to make my own judgement and I did really well by doing that. After all it is a data response question! :h:

Reply 63

Deavk006

MENA countries have a comparative advantage on producing certain goods & services, lower labour costs, low regulation etc...

Reply 64

Chittesh14

Original post by physicsamor

and no peeking at the ms!)

I thought these are probably two units that noone likes :colondollar:

answer away and dont be afraid even if you think you are wrong.

I'll probably attempt answering them tomorrow night, I need to revise for a mock tomorrow.

These are A2 questions right ?
Do you have any AS questions too please because I'm an AS student lol. Because everyone here can expand on my AS answer too 😊 as they have more knowledge !

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Reply 65

keynes24

Original post by Nadine_08

The data is only application, if an answer is based entirely on data (quite unlikely even if your knowledsge is low) that is like L1/low level 2. It is your analysis and evaluative comments that push you to higher levels. If a question refers to the importance of NMW to reduce inequality, using the data and diagrams would count as application and the impact on employment and unemployment linked to inequality would be the analysis (use of economic terms, good chain of reasoning, explaining diagrams)

Reply 66

Deavk006

Also mention other ways to help reduce inequality also

Reply 67

physicsamor

Original post by Chittesh14

Yeah they are a2 but Id be happy to help, what are your weakest topics?

Reply 68

Chittesh14

Original post by physicsamor

Yeah they are a2 but Id be happy to help, what are your weakest topics?

Erm not many but I just don't know what to write in essays lol as if I've got the knowledge but clueless when it comes to exams.

I don't actually revise maybe that's why whatever I've learnt is all from lessons pretty much lol.

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Reply 69

username2052983

Is anyone going to go or have been to Tutor2Us grade booster workshop?

Reply 70

physicsamor

Original post by BintM

Is anyone going to go or have been to Tutor2Us grade booster workshop?

been to the economics one, was helpful for like case studies and evaluation points

Reply 71

physicsamor

Original post by Chittesh14

Alright how about an AS macro question taken from the jun13 paper, assess the impact on the performance of the UK economy of a significant increase in exports and a reduction in imports,

Any ideas?

Reply 72

Chittesh14

Original post by physicsamor

Alright how about an AS macro question taken from the jun13 paper, assess the impact on the performance of the UK economy of a significant increase in exports and a reduction in imports,

Any ideas?

An increase in exports means increasing the total value of export sales, leading to an increase in the balance of payments surplus or decrease in the balance of payments deficit. This is further strengthened by the decrease in exports which has the same effect. This helps to achieve one of the UK's main policy objectives - attaining a satisfactory balance of payments, avoiding an external deficit as this could create an exchange rate crisis.

Firstly, imports and exports are both part of net trade or net exports which is a component of AD. As exports increase and imports decrease, the net exports (exports-imports) increase in value, shifting the aggregate demand curve to the right. This can affect the economy in many ways as increasing aggregate demand leads to an increase in real national output and therefore leads to economic growth as more output is being produced. This can also be expressed using the circular flow of income: imports are leakages or withdrawals which reduce the amount of national income in the circular flow, whereas exports are injections which increase the amount of income in the circular flow. As the exports increase and imports decrease, the overall injections are greater than the leakages and the equilibrium level of national income rises, leading to economic growth.

However, the extent to which economic gowth occurs or real national income increases by as a result of the increase in aggregate demand depends on the national income multiplier. If the mutliplier is >1, then real national income is more elastic or sensitive to changes in aggregate demand - it will increase more proportionately than the initial increase in aggregate demand. However, if it is less than 1 or inelastic - it will lead to a lower proportion of increase in national income. Either way, economic growth still occurs - but the multiplier determines whether its a large growth or a small growth.

Going hand in hand with this concept is employment, another macroeconomic objective. Increases in exports could mean boosting employment because it is indicative of higher domestic demand - labour is derived demand. This means more people will be unemployed - decreasing the natural rate of unemployment such as those who are structurally unemployed (finding new jobs etc). or cylically unemployed due to the lack of demand in the economy. This overall leads to economic growth as more employment means more incomes rising leading to more consumption by individuals and investment by firms as business confidence (animal spirits) grow - leading to AD shifting to the right - and economic growth occurring. This is an example of Germany's competitiveness: German exports are competitive, Germany is selling a lot of exports and this is leading to higher domestic employment in the exporting sector. Without the strong export demand, the German economy would be weaker and we would be liable to have higher unemployment. On the other hand, a reduction in imports could indicate the complete opposite too - in a recession, maybe the economy is busting and consumer spending lowers leading to a reduction in imported goods demanded - showing a weak economy suffering. This may lead to a surplus but can be an example of a case of a recession and high unemployment - bad for the economy.

Talking about the mutliplier earlier, an important concept of marginal propensity to consume comes handy. If exports are increase, the marginal propensity to consume must be high and domestically produced goods are being demanded more. This also leads to more consumption, increase in AD, ceterius paribus and therefore economic growth.

Assuming increase in exports and reduction in imports go hand in hand with the exchange rates, the UK's change rate must be low or possibly devalued - making exports cheaper and increasing their sales, and making imports more expensive - decreasing their sales. This shows increases in the UK's international competitiveness - maybe through productivity levels increasing - which leads to long-term economic growth, shown by the LRAS shifting to the right.

So, the macroeconomic performance of an increase in exports and decrease in imports really depends on the reason as to why those factors changed: if it is due to competitiveness increasing, it will lead to higher demand for exports and will boost domestic employment which is good for the economy. However, if it is due to a recession hitting domestic demand causing a fall in import spending, then not only will exports fall - but so will imports (fall even more), so domestic employment decreases and unemployemnt increases heavily. Also, all these shifts in AD causing real national output to increase also depends where the AD curve is intersecting or when the economy is operating on the AS curve - if it is at the start of the curve in the horizontal section where the curve is elastic and the increase in AD will lead to a large increase in real national income - because there is tons of spare capacity and the labour market is loose - the economy is operating under its full potential or productivity capacity and are in a negative output gap, so increases in demand can be backed up by an increase in the supply. However, if AD was closer to the end of the SRAS curve - the vertical section which is inelastic it will lead to only increases in price level and very small, if any, increases in real national output. This is because the labour market is now tight and the economy is producing at its full productive capacity and cannot increase supply any more - this leads to intense demand-pull inflation or unsustainable economic growth. So, economic growth always occurs but with consequences and in this case, the extent to which it occurs depends on where the economy is operating on the SRAS or LRAS curve. In addition, you can differentiate between the type of economic growth that occurs - if the economy was in a negative output gap, any increases in AD will lead to short-term economic growth or economic recovery, usually happens after a recession.

In essence, it's all about export-led growth in this context where in the short run, economic growth occurs due to increases in exports and in the long-run, this may lead to long-run economic growth resulting from the overall increase in international competitiveness of exporting industries. In addition, demand-pull inflation could lead to increases in the price level and could make the economy less competitive again, so may reduce the surplus in the future or increase the deficit - so the economic growth may not be sustained. Also, the multiplier plays an important role as if economic growth outpaces aggregate demand also - cyclical unemployment occurs again in other industries.

NOT SURE IF I CAN TALK ABOUT J-CURVE OR MARSHALL-LERNER CONDITION - to evaluate whether it leads to economic growth or not - depends on value of export increase and import decrease.

I know I've talked a bunch of rubbish in this essay, I could've wrote much more tbh but I cba. I wrote half of random stuff lol which might be off-topic to the question but I just wanted to pure concentrated economic juice out of my brain and release it all just to show I have the knowledge but may not know if it's relevant or not - which hopefully you will help me decide :smile:

!!!

Reply 73

Chittesh14

Original post by GCSE2016Troop

Hi,

When LRAS shifts to the right, why does the price level decrease. I think it is to do with cost-push inflation decreasing but not really sure. If it is that, I still don't understand why a shift ouitwards in LRAS results in it decreasing.

Think about it. An LRAS diagram alongside with an AD diagram. If the LRAS shifts to the right, it moves along the AD curve to the right - where price level decreases, but real national output obviously increases (increase in productive capacity). It means the economy can produce more at each price level and AD meets AS at a lower price level - that's all it is.

The reasons why depend on the reason as to why LRAS shifting rightwards lol.
For example, if the international competitiveness is increasing - the UK's economy is more internationally competitive, which means more trade and therefore LRAS shifts to the right. This could be due to decrease in average costs of production - more cost efficient than its relative trading partners. It's like microeconomics - if the firm reduces its costs - the SRAS curve shifts to the right and the consumers benefit in the form of lower prices. The case in the same here in terms of the macroeconomy - the increased productivity and competitiveness led to cheaper export prices, making them more competitive and the price level decreases. However, eventually - this will be unsustainable as increaase in AD leads to inflation lol. But, the international competitiveness affects the LRAS curve leading to deflation which is what you wanted.

Reply 74

osule030.209

Would an increase in productivity of labour e.g. through training lead to an increase in SRAS or LRAS. Everywhere online says it will shift LRAS out but it confuses me because SRAS is all about costs of production so surely increased productivity will lead to lower costs of production and therefore shift SRAS out rather than LRAS. Thanks for any answers

Reply 75

Nadine_08

Original post by osule030.209

I think it is LRAS because increasing productivity of labour, e.g. through training, would lead to a reduction in structural unemployment, which is a type of unemployment associated with long term

Also isn't it lower costs of production that leads to increased productivity? Not the other way round

Don't count on me though lol, I don't really know anything..

Reply 76

username3127660

What are you guys using to revise multiple choice questions, any good resources for this out there? It would be even better if anyone has a resource focused on multiple choice questions for the new spec.

I'm also having a hard time understanding what the AO's (assessment objectives) are, I know what the spec says about them but does anyone mind breaking them down for me. Every essay you write should try and deliver on the AO's in order to be successful so it's crucial I understand them before the exam.

Reply 77

Chittesh14

Original post by Nadine_08

It can be both ways. Lower costs of productions indicate higher levels of productivity.

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Reply 78

Chittesh14

Original post by osule030.209

It impacts both in the ways that you have explained for SRAS and the next poster @Nadine_08 has explained for LRAS. I will explain properly once I finish drinking tea.

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