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# AQA Economics Unit 4 11th June 2013 watch

1. (Original post by Parkway Drive)
That seems like it would be a unit 2 question.

However, use the Phillips Curve - as unemployment falls, inflation rises, expectation of inflation/cost of living means that workers big up their wages in real terms - so the rate of inflation becomes embedded in the standard wage, unemployment falls back to NAIRU and so forth, leading to spiraling wage costs and inflation. (Draw Graph)

Also, don't draw too many graphs, 2-3 is fine. I think you only get marks for 2 so make sure they're good, and if you can, make them unit 4 graphs. Remember, graphs are easy marks! =]
Mind explaining the NAIRU point? Dont think my teachers have covered that. Btw, are you taking this next month as well?
2. (Original post by BearPear)
Mind explaining the NAIRU point? Dont think my teachers have covered that. Btw, are you taking this next month as well?
Yeah I am. I'm not great with the Phillips Curve, but this is my understanding.

NAIRU - The Natural Accelerating Inflationary Rate of Unemployment.

When aggregate demand increases, the unemployment falls right? Since there is a greater real output, more workers are needed to produce these goods.
This causes demand-pull inflation to an extent, even though not necessarily, but for the sake of explaining the relationship we say it does.

As a result of inflationary pressure, the cost of living increases. Therefore, workers will demand higher wages i.e. bid up their wages in real terms (taking into account inflation) in order to compensate for the increase in the cost of living.

As the wage cost rises, the cost of production for firms rises, thus causing cost-push inflation. Firms then cut back their, fewer goods are produced and fewer workers are needed. Unemployment then falls back to the natural accelerating INFLATIONARY rate of unemployment. The level of inflation in the economy, say it was 4%, is now embedded in the standard wage.

Then the whole cycle begins again with demand-pull inflation increasing.

For the NAIRU point, you just need to know what it stands for and what role it plays in the Phillips Curve theory. I think there might be more to it as you progress in learning economics, but at this stage, I think that's all we need to know.

Hope this helps.
3. guys does anyone know how you could answer this question?

Extract B (lines 40-42) suggests that the US and the UK may be ‘very concerned for
their macroeconomic performance’ if free trade agreements lead to greater openness of
their economies.
Using the data and your economic knowledge, assess the possible impact on the UK
economy of greater openness to world markets. (25 marks)

I really do not know the pros and cons of protectionism and free trade? I just know the basics like comparative advantage and how to draw tariff diagram but cannot explain it!

Your ideas would be of much use!
Regards
4. Has anyone got an A in this exam? Any tips??
5. (Original post by ineedtorevise127)
guys does anyone know how you could answer this question?

Extract B (lines 40-42) suggests that the US and the UK may be ‘very concerned for
their macroeconomic performance’ if free trade agreements lead to greater openness of
their economies.
Using the data and your economic knowledge, assess the possible impact on the UK
economy of greater openness to world markets. (25 marks)

I really do not know the pros and cons of protectionism and free trade? I just know the basics like comparative advantage and how to draw tariff diagram but cannot explain it!

Your ideas would be of much use!
Regards
Start of by defining the four main macroeconomic objectives growth, BOP satisfactory, low unemployment and low and stable inflation. Define what greater openness means i.e. globalisation vs protectionism.

Talk about trade with emerging economies like China (Line 31), as China becomes richer, they demand goods. Talk about exports (positive external shock), trading on the basis of comparative advantage (Line 20), BOP satisfactory, multiplier effect.

Next paragraph (or even in the same one as before, make sure its not too long though, probably best to make a new one.) Say how more exports affects growth, standard of living.

Next one, talk about unemployment, how growth means less unemployment.
Maybe mention how this affects other parts of the economy such as the government, poverty, inequality.

Also, you could mention the negatives of protectionism, added on to points such as:

retaliatory action from other countries

welfare loss

encourages a black market

I'll make a proper plan tomorrow/later, and I'll show you how to explain comparative advantage and the tariff diagram in a paragraph/in context.
6. (Original post by Parkway Drive)
I was just thinking because the way you explain it is that it begins when inflation is at 0% no? Then, to model the relationship between inflation and unemployment, you say aggregate demand increases, which leads to lower unemployment by higher inflation and you explain why...

How else would you show the relationship between the two if it weren't demand-pull inflation in the first place? Cost-push inflation increases unemployment... i.e. the shift to the left of the AS curve.

Otherwise, could you please analyse how any other type of inflation i.e. cost-push leads to an increase decrease in unemployment, and use it to explain the Phillips Curve.

Thanks =]
I think your argument of 'demand pull' inflation is based on the logic of: firms hiring more workers, wages increases, demand increases, hence inflation.

That's fine, but how about this way: firms hiring more workers, labour cost increases, profit decreases, firms [have to] increase prices to keep their profit margin constant, hence inflation. I suppose you can call this Cost-push inflation, but I personally wouldn't do that to confuse myself.

Note that when I say firms hiring more workers, it means unemployment is at a LOWER rate.
Don't confuse a 'lower rate of unemployment' with a REDUCTION of unemployment. The Phillips curve doesn't show an shift in unemployment (therefore there is no reduction or increase), it only shows the RELATIONSHIP, ie: what the inflation would be if unemployment is at A, what it would be when inflation at B.
In a way, it's similar to the Demand curve alone, just show the relationship between price and output. You can't call it a shift because there is only one curve on the graph.

Hopefully I haven't confused you to death...... if I have, blame Economics!
7. (Original post by hypercube)
I think your argument of 'demand pull' inflation is based on the logic of: firms hiring more workers, wages increases, demand increases, hence inflation.

That's fine, but how about this way: firms hiring more workers, labour cost increases, profit decreases, firms [have to] increase prices to keep their profit margin constant, hence inflation. I suppose you can call this Cost-push inflation, but I personally wouldn't do that to confuse myself.

Note that when I say firms hiring more workers, it means unemployment is at a LOWER rate.
Don't confuse a 'lower rate of unemployment' with a REDUCTION of unemployment. The Phillips curve doesn't show an shift in unemployment (therefore there is no reduction or increase), it only shows the RELATIONSHIP, ie: what the inflation would be if unemployment is at A, what it would be when inflation at B.
In a way, it's similar to the Demand curve alone, just show the relationship between price and output. You can't call it a shift because there is only one curve on the graph.

Hopefully I haven't confused you to death...... if I have, blame Economics!
Ahh I see, I fully understand what you're saying. I didn't think of it in that way, but I guess it works.

And thank you for clearing up the rate and reduction bit, I've just realised how important of a mistake it is interchanging those two words.

Cheers =]
8. (Original post by theseeker)
Hi
Could you please post the unit 3 2013 jan paper?
...
Attached Images
9. AQA-ECON3-QP-Jan13.pdf (115.4 KB, 884 views)
10. AQA-ECON3-W-JAN 13.pdf (34.9 KB, 217 views)
11. AQA-ECON3-W-MS-JAN-13.pdf (97.7 KB, 2878 views)
12. What are the most likely topics tht will come up for unit 3 and 4
13. I think that the EU question may be like: monetary policy: same I.R in the EU and its significance to the UK if we joined; or should we adopt the euro, or should countries join/leave. Benefits of the single market? I don't know.. but since last time globalisation come up on the essay questions I doubt it will come again.. and inflation/deflation tends to appear constantly.. any other ideas of what may come up for the EU question or other essay ones?
14. What grade is everyone on

Econ1:
Econ2:
Econ 3:

15. not looking forward to this exam.. especially after my unit 2 resit and how meh the paper was!
16. (Original post by shorttstuff)
not looking forward to this exam.. especially after my unit 2 resit and how meh the paper was!
Did the Unit 2 resit to.. did you do context2?
17. (Original post by lidiya)
Did the Unit 2 resit to.. did you do context2?
Yeah the one about balance of payments? Couldn't do anything to do with growth and real incomes!

18. (Original post by shorttstuff)
Yeah the one about balance of payments? Couldn't do anything to do with growth and real incomes!
yeah through the first one was quite hard...really hope I did well.. u doing unit 4 in june
19. (Original post by lidiya)

yeah through the first one was quite hard...really hope I did well.. u doing unit 4 in june
I have quite a bit of leeway to do better, just got a D last year

Yeah otherwise I wouldn't of posted in this thread
20. qr95.. I got 95/100 in Unit 1, 85/100 in Unit 2 and 100/100 in Unit 3, but I am really really scared about this exam.. I just feel like I need to know everything that tiny bit more but my other exams are taking over! Not long to go now, good luck everyone
21. (Original post by kelbel1)
qr95.. I got 95/100 in Unit 1, 85/100 in Unit 2 and 100/100 in Unit 3, but I am really really scared about this exam.. I just feel like I need to know everything that tiny bit more but my other exams are taking over! Not long to go now, good luck everyone
WOW , tips for econ3 please im finding it really difficult

Wat resources did you use

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22. Not sure if anyone is interested but tutor2u have highlighted topics that they believe at least one will show up

The consequences for the UK economy should the US economy experience a double-dip recession
The economic consequences for the UK of natural disasters such as flood, drought, tsunami (external shocks) and economics of global price volatility
The fast-changing role of the Chinese economy and its implications for the UK
The impact on the UK economy of major instability of the euro
The impact on the UK economy of the newer membership of the EU
23. (Original post by Oliver1234)
Not sure if anyone is interested but tutor2u have highlighted topics that they believe at least one will show up

The consequences for the UK economy should the US economy experience a double-dip recession
The economic consequences for the UK of natural disasters such as flood, drought, tsunami (external shocks) and economics of global price volatility
The fast-changing role of the Chinese economy and its implications for the UK
The impact on the UK economy of major instability of the euro
The impact on the UK economy of the newer membership of the EU
Have you got a link for this mate?

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