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# AQA Economics Unit 4 11th June 2013 Watch

1. (Original post by dani robin)
Can someone explain to me what the quantity theory of money is? Have no clue:/ :/ :/

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Hey. In short, the quantity theory of money is that as more money (credit) circulates around the economy, the general price level will increase (inflation)

So for example, if interest rates are low, or the Bank of England introduces more Quantitative Easing, then the money supply would increase, and the price level would be more likely to increase too.
Hope that explained it for you.
2. (Original post by Lako)
Here are diagrams for Comparative Advantage and Crowding Out

Attachment 225113- Crowding out

Ooops, my apologies, I did know the comparative advantage one, showing the PPB's of the countries. For crowding out, that one is not on the spec, you need basic knowledge and the evaluation points.
3. (Original post by kelbel1)
Ooops, my apologies, I did know the comparative advantage one, showing the PPB's of the countries. For crowding out, that one is not on the spec, you need basic knowledge and the evaluation points.
Yep you're right its not essential, but if you needed a diagram it wouldn't hurt to put that one in I guess
4. (Original post by Lako)
Hey. In short, the quantity theory of money is that as more money (credit) circulates around the economy, the general price level will increase (inflation)

So for example, if interest rates are low, or the Bank of England introduces more Quantitative Easing, then the money supply would increase, and the price level would be more likely to increase too.
Hope that explained it for you.
Thanks mate so I could talk about it ig I mention anything about interest going down?

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5. (Original post by dani robin)
Thanks mate so I could talk about it ig I mention anything about interest going down?

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Yes, it'd be great for evaluation when talking about using interest rates to stimulate demand, as you could say it would increase inflation due to the quantity theory of money.
6. How do people evaluate the essays to get into the top range of the marks? I'm never sure how to do it!

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7. (Original post by AndyBoughton)
How do people evaluate the essays to get into the top range of the marks? I'm never sure how to do it!

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Real world examples/current UK knowledge is a sure fire way to bump up your evaluation marks

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8. (Original post by Lako)
Yes, it'd be great for evaluation when talking about using interest rates to stimulate demand, as you could say it would increase inflation due to the quantity theory of money.
Ahhh wonderful, thanks again

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9. Is splitting section A and B into an hour each a good idea or should more time be allocated to section A?
10. (Original post by CoolStoryBroo)
Is splitting section A and B into an hour each a good idea or should more time be allocated to section A?
That's what I would - an hour each and it works for me x
11. anyone care to explain why 2% inflation target should/shouldn't be relaxed? thNks

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13. last minute predictions on what will come up?
14. (Original post by gasgang)
anyone care to explain why 2% inflation target should/shouldn't be relaxed? thNks
Not sure if these are right but they are the first things coming to my head.

Arguments for deflation, i.e to reduce from 2% - reduce our trade deficit on the current account - deflation makes the relative price of our exports cheaper and imports more expensive.

Higher inflation could erode sovereign debt loads however this is a short term fix - in the long term you want stability to 2% target rate is a coherent ideal.
15. (Original post by ineedtorevise127)
last minute predictions on what will come up?
Just revise all the macroeconomic objectives, different policies to change them
16. if an essay like this came up how would you answer it
2 Evaluate the view that, in the long run, conflict between the major macroeconomic
objectives can be avoided. (25 marks
17. (Original post by ineedtorevise127)
if an essay like this came up how would you answer it
2 Evaluate the view that, in the long run, conflict between the major macroeconomic
objectives can be avoided. (25 marks
I know its AS but its still useful!

18. this is probably a really stupid question but what are the policies to reduce high inflation (because of cost-push inflation) ?
19. (Original post by gasgang)
anyone care to explain why 2% inflation target should/shouldn't be relaxed? thNks
Should:
Current poor growth figures lead to the argument that the Bank of England should focus less on inflation and more on growth i.e. go for growth even if inflation exceeds the 2% target. In fact, the government has actually recently told the Bank of England that this is what they should do.

Rising cost push inflation in the UK as a result of rising food and oil prices make the 2% target seem less and less plausible - we haven't reached the 2% target in a long time

Shouldn't
Changing the target will, at least in the short run, confuse the whole system that the Bank of England runs on. Their setting of a target is to reduce the adaptive expectations of the population so that they do not ask for ever increasing wages since they think that inflation is rising. Relaxing the target could potentially lead to confusion so that people will ask for higher wages than the rate of inflation and so it could spiral out of control

Inflation erodes international competitiveness. If the UK government was to officially relax the 2% target and replace it with a higher one then it could serve as a disincentive to foreign firms in terms of attracting business/FDI since rising inflation is a marker for an unstable economy
20. Hi can anyone tell me what the consequences for the UK are of say Croatia joining the EU? Really stupid question but I've forgotten it all

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