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    Ah, I see, thanks for clearing that up Sports Racer.
    As for the point on competitiveness, I would really have thought that the simple, obvious, marks-in-the-bag point would be that exports would fall, hence AD would fall (assuming ceteris paribus), thus leading to a fall in real output and price.

    However, in the long-run, you could argue that since there is less demand for exports, there is less demand for £, so the value of the currency falls. Hence, in the long-run a fall in competitiveness could self-correct itself to an extent.

    Yazmin's point is valid, but it assumes that the lack of competitiveness is caused by low productivity - "As production costs increase due to low productivity therefore price of goods will increase.", when it could be due to other reasons - a high value of the pound, poor quality goods or goods with a poor reliability.
    Unless I'm missing something, that is.
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    guys!! help me out here please

    anyone have the mark scheme for june 07
    and just to remind people,
    trade deficit, globalisation, non-renewable resources (oil) came up last year. just read some threads about how these topics are likely to come up because they havent been tested in a while.
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    cANT SEE ANYTHING WRONG WITH THAT CONCLUSION...

    I WOULDNT REALLY TRY TO IMPRESS THE EXAMINERS WITH COMPLEX POINTS, OBVIOUS, WELL EVALUATED POINTS SCORE AS HIGH IF NOT HIGHER.
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    hmm Maybe im over evaluating the competitiveness situation.

    For a 60 marker questions what points and evaluation could be used for:

    Likely economic implications of a country increasing its protectionist measures?
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    -Higher employment in the short-term. As 'infant' and 'geriatric' industries are protected, so are jobs.
    EVAL: Only in short-term. Industries can't be protected from global competition forever.

    -Improvement in balance of trade in goods/services, assuming cetris paribus. Imports are more costly, thus people will be disinclined to import goods.
    EVAL: The assumption of ceteris paribus - trade partners may raise their own barriers to retaliate, leading to a fall in exports.

    -Lower efficiency in certain industries. Industries will be more protected from global competition, hence 'X' inefficiency may rise.
    EVAL: Once again, only short-term.

    -Reduced consumer welfare. If you know it, use the tariff diagram to show the loss of consumer welfare. If you don't, then I'll gladly try and find the diagram on the net somewhere.
    EVAL: Depends on the price elasticities of domestic demand + supply.

    And if you have a little time at the end and want to nail all the evaluation marks, prioritise.
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    (Original post by chidona)
    -Higher employment in the short-term. As 'infant' and 'geriatric' industries are protected, so are jobs.
    EVAL: Only in short-term. Industries can't be protected from global competition forever.

    -Improvement in balance of trade in goods/services, assuming cetris paribus. Imports are more costly, thus people will be disinclined to import goods.
    EVAL: The assumption of ceteris paribus - trade partners may raise their own barriers to retaliate, leading to a fall in exports.

    -Lower efficiency in certain industries. Industries will be more protected from global competition, hence 'X' inefficiency may rise.
    EVAL: Once again, only short-term.

    -Reduced consumer welfare. If you know it, use the tariff diagram to show the loss of consumer welfare. If you don't, then I'll gladly try and find the diagram on the net somewhere.
    EVAL: Depends on the price elasticities of domestic demand + supply.

    And if you have a little time at the end and want to nail all the evaluation marks, prioritise.
    I had the exact same 4 points: domestic inefficiency, secure employment in short term, welfare loss using diagram, correcting a deficit on the current account. But half the points arent even in the mark scheme so i get worried.
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    i think this is the one

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    (Original post by Yasmin2K8)
    I had the exact same 4 points: domestic inefficiency, secure employment in short term, welfare loss using diagram, correcting a deficit on the current account. But half the points arent even in the mark scheme so i get worried.
    They're all valid, and you'd be 100% in using them in the exam. What points did the markscheme give?
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    Retaliation, Inflation based on AD/AS, unemployment levels, welfare loss

    Evaluation short term/long term, nature of measure i.e. quota tariff, extent of increase in trade.

    ----

    Would correct evaluation for welfare loss be the tax revenue gained can be redistributed and will improve fiscal position?
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    Guys, this thread has confused me a bit. Oil prices reduce AD?

    Higher oil prices, as I'm sure you will agree, is a supply-side shock. Costs of production increase and so prices increase too. Now! Higher prices will not shift AD anywhere but rather will cause a contraction along the curve to the new equilibrium where the price level is higher and real output lower.

    (Original post by newlife)
    Households have less discretionary income, i.e. income after committed payments. Rising oil prices mean energy bills are higher, cost of petrol also soars, and thus AD for goods and services falls since consumers are less willing and able to purchase goods
    The level of consumption is determined by the level of disposable income, not discretionary, surely. As taxes have remained the same, so has your disposable income.

    Or am I crazy?
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    (Original post by Yasmin2K8)
    Actually depending on the extent of the fall in competitiveness hun the price level will increase.

    As production costs increase due to low productivity therefore price of goods will increase. If unemployment increases then output will also fall as costs are too high Loss in output will mean a fall in AS. Thus if AS falls below or at a faster rate than AD inflation will occur thus rise in price levels. AD may only fall slightly as as X-M is only a small proportion of AD however a consequent fall in consumption due to higher prices will lead to a much bigger fall in AD

    But its unlikely prices will fall, quite the opposite.
    Competitiveness isn't just about low productivity. It could be low quality or high relative prices.
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    6356 Mark Scheme June 2007
    1. (a) The number and size of trading blocs, such as the European Union, have increased in recent years. To what extent does this trend conflict with the aims of the World Trade Organisation?
    Explanation of terms:
    • trading blocs – types include free trade areas, common markets, customs unions, economic unions. Characterised by free trade between member countries and common external tariffs
    • WTO – a forum to promote trade agreements with the aim of promoting free trade; also helps to settle trade disputes
    • WTO, therefore, contributes to trade creation while trading blocs result in both trade creation and trade diversion.
    • CETs distort comparative advantage, leading to misallocation of resources
    What's CET?
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    (Original post by chidona)
    However, in the long-run, you could argue that since there is less demand for exports, there is less demand for £, so the value of the currency falls. Hence, in the long-run a fall in competitiveness could self-correct itself to an extent.
    It may not correct itself if there is a structural problem within the economy, such as the UK's decline in manufacturing. No level of currency depreciation will make our manufactured goods competitive.
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    True. It's a good augmentation to the evaluation point.
    And The Dark Side - CET = Common External Tariff, I presume.
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    (Original post by The Dark Side)
    What's CET?
    common external tariff
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    what's the critique on the law of comparative advantage?
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    (Original post by newlife)
    does a deficit in the trade in goods matter?
    Point 3 - yes because it shows we're less competitive. (this is where the point seems a bit slim, and self explanatory so i dont know how to expand!)
    Explain why it shows we're less competitive. A trade in goods deficit means that the value of imports is greater than the value of exports. It shows that foreigners are not demanding our exports because we are less competitive. Suggest a few reasons why the UK is less competitive - high labour costs, over valued pound etc
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    (Original post by The Dark Side)
    What's CET?
    Common External Tariff - "The single tariff rate agreed to by all members of a customs union on imports of a product from outside the union."
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    (Original post by Apricott)
    sorry but can you please explain your first point?
    on this type of essay, i normally answer YES, it does matter (downward pressure on your currency; financing debt- cannot always rely on capital inflows and FDI)
    But downward pressure on your currency will increase competitiveness as prices will fall. Exports will then increase, ceritus parabus. Therefore, unless there is an underlying structural problem, it doesn't matter as it is just cyclical.
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    (Original post by Apricott)
    DO you think European Monetary Union is going to come up?
    My teacher said that EMU isn't such a big issue currently, that was more discussed couple of years ago rather than now. So i kinda didn't revise that much on EMU.. what d'u guys reckon?
    I don't think it will as it is such an obvious question that everyone will have revised. If they are going to ask a question about EMU, it won't be straightforward, maybe tied into investment or MNCs.
 
 
 

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