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# Edexcel AS Economics (New Spec) Unit 2 - 23rd May 2016 Watch

1. (Original post by harryleavey)
This was from Tutor2U right?
The second one is actually wrong
For the first one:
The base index is Q3 of 2014. So you will need to calculate percentage change between 74,459 and 70,061

So use change/original * 100
-4398/74,459 * 100 = -5.9

So the index for Q4 of 2013: 100- 5.9 = 94.09 (ignore the rounding error)
yes it is tutor2u.

Thanks very much, that's what I got for the first one but was confused as to how they got the second answer
2. (Original post by LordHeskey)
Can someone help me with this question:'Discuss the likely impact of both a lack of investment and an appreciation of the British Pound on 'inflationary pressures' in the UK' (15 marks)Was unsure what it means by 'inflationary presures'
This is the essay I wrote for that exact question.KAA: Inflation is an increase in general price level leading to a fall in the purchasing power of the pound. If there is a 'lack of new business investment' this leaves spare capacity in the economy, reducing the real output of the economy. This is shown on the diagram where Y1 to Y2 shows the impact of spare capacity on aggregate supply, and PL1 - PL2 shows the exerts of cost push inflation as fewer goods are being produced and aggregate demand remains consistent. This causes cost push inflation increasing inflationary pressure in the UK. (THE DIAGRAM DRAWN FOR THIS QUESTION WAS A LRAS CLASSICAL WITH LRAS SHIFTING LEFT)EVALUATION: However this depends on business confidence. If business confidence is low then firms are less likely to make a new investment as their main objective is to maximise profits. Therefor investing money into a new project which won't provide them with a maximised profit would be a loss.KAA: On the other hand, the appreciation of the pound means imports are cheaper and exports are more expensive. This contributes to the trade deficit where exports are lesser than imports, as imported raw materials contributes to factors of production, meaning firms produce more and thus an increase in output. This causes the short run aggregate supply curve to shift to the right meaning an increase in price level and an increase in output. (DIAGRAM DRAWN WASA NORMAL AD AS (similar to S and D for unit 1) WITH SRAS SHIFTS RIGHTWARDS)EVALUATION: However an appreciation of the pound depends on the price elasticity of goods being imported and goods being exported. If elasticity if elastic then foreign buyers can purchase UK goods elsewhere. Whereas if elasticity is inelastic then foreign buyers will purchase UK goods regardless of the increase in cost.
3. (Original post by amelienine)
What does the term 'bubbles in asset prices mean'?
This is best explained by the Housing bubble of 2008.

House prices were increasing rapidly, and unsustainably. This will inevitably lead to a huge crash in prices. Aka a burst in the housing bubble
4. With QE, I understand that the government buys assets from firms using cash they have made, but what are these 'assets' and why do the firms wish to sell them?
5. (Original post by harryy99)
With QE, I understand that the government buys assets from firms using cash they have made, but what are these 'assets' and why do the firms wish to sell them?
The 'assets' are government bonds the banks own that the BofE are buying back. A gov bond is when the government sells I.O.Us basically; the banks pay the government now (they "buy" the bond) on the condition that the government will repay them later with a larger amount than the bank initially gave them (i.e to allow them to profit). For example I buy a gov bond today of £2,000 and in 3 years the government repay my £2,000 plus 5% interest let's say.

The bank of england creates electronic money and buys these bonds back during quantitative easing (i.e prematurely end the government bond) meaning banks now have more cash and so are more likely to loan etc.

The reason banks are willing to sell them is perhaps to obtain more cash quicker, as they won't have to wait until the bond period elapses (the 3 years i used in my example)
6. (Original post by harryleavey)
1. Inelasticity of LRAS: can lead to demand pull inflation
2. I don't understand what you are asking? (redistribution of income?)
3. The reason for this is that economic growth can be unsustainable, leading to inflation or bubbles. For instance inflation in Germany led to the rise of the Nazi party, or the UK Lawson Boom in 1980s
4.Yes and Yes (wage inflation leads to cost-push inflation)
5. Increasing interest rates makes it more expensive for consumers to borrow. This is likely to affect low incomes the most, worsening income distribution

For #1, does that apply for both classical& keynesian LRAS?

#2 I meant who loses and earns you know those with fixed incomes lose and those stuff.

Thanks a lot anyway😄
7. Any predictions for tomorrow?
8. (Original post by harryleavey)
This was from Tutor2U right?
The second one is actually wrong.
For the first one:
The base index is Q3 of 2014. So you will need to calculate percentage change between 74,459 and 70,061

So use change/original * 100
-4398/74,459 * 100 = -5.9

So the index for Q4 of 2013: 100- 5.9 = 94.09 (ignore the rounding error)
9. Does anyone have the tutro2u paper mark schemes?
10. (Original post by 17lina)
For #1, does that apply for both classical& keynesian LRAS?

#2 I meant who loses and earns you know those with fixed incomes lose and those stuff.

Thanks a lot anyway😄
Yes this applies for Classical and Keynesian
11. (Original post by Hot&SpicyChicken)
Does anyone have the tutro2u paper mark schemes?
Not really meant to share them but who cares. (I have made it so these links will stop working in 12 hours)

http://hleavey.site/paper1
http://hleavey.site/paper2

With all due respect to Tutor2U, there are quite a few mistakes in the mark scheme, see here: http://hleavey.site/mistakes
12. How many KAA and evaluation points are there for 10, 15 and 20 markers?

Posted from TSR Mobile
13. On a markscheme it said 'explain the transmission of AD/AS', what exactly do they mean by that? Thank you
14. (Original post by nicoleb132)
yes it is tutor2u.

Thanks very much, that's what I got for the first one but was confused as to how they got the second answer
Mistakes in the mark schemes (tutor2u)
http://hleavey.site/mistakes
15. (Original post by Sabrinaaiini)
How many KAA and evaluation points are there for 10, 15 and 20 markers?

Posted from TSR Mobile
Generally it's 40% for evaluations, at least that's what we've been told So you're looking at 8 marks out of a 20 marker (:
16. (Original post by Sabrinaaiini)
How many KAA and evaluation points are there for 10, 15 and 20 markers?Posted from TSR Mobile
(Original post by DeafeningSilence)
Generally it's 40% for evaluations, at least that's what we've been told So you're looking at 8 marks out of a 20 marker (:
This is slightly inaccurate:

4 marks: no evaluation
5 marks: no evaluation
6 marks: no evaluation
10 marks: 4 marks for evaluation
15 marks: 6 marks for evaluation
20 marks: 6 marks for evaluation

Let me know if you need to know how the other marks are allocated
17. (Original post by DeafeningSilence)
Generally it's 40% for evaluations, at least that's what we've been told So you're looking at 8 marks out of a 20 marker (:
It's 6, and 14 KAA.

Posted from TSR Mobile
18. (Original post by AsmaaMahamud97)
It's 6, and 14 KAA.

Posted from TSR Mobile
Correct
19. (Original post by harryleavey)
This is slightly inaccurate:

4 marks: no evaluation
5 marks: no evaluation
6 marks: no evaluation
10 marks: 4 marks for evaluation
15 marks: 6 marks for evaluation
20 marks: 6 marks for evaluation

Let me know if you need to know how the other marks are allocated
Sorry for the inaccuracies! Working off what I've been told to expect (:
20. (Original post by DeafeningSilence)
Sorry for the inaccuracies! Working off what I've been told to expect (:
Yeah, that is fair enough. It doesn't really make a difference to what you write. I will just simply evaluate every point I make if the question is 10 or more marks.

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