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    Do we have to know about Price Deflation?
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    (Original post by kingLAWZA)
    Do we have to know about Price Deflation?
    yes - but not much more than it happens and its bad.

    But can someone help in regards to inflation exchnage rate relationship.
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    (Original post by boinz)
    yes - but not much more than it happens and its bad.

    But can someone help in regards to inflation exchnage rate relationship.
    Thanks, my teacher gave me this really detailed essay I don't get a bit

    Low exchange rate > exports more price competitive > increased foreign demand > in SR excess demand compared to supply > Inflation

    Low exchange rate > Imports more expensive > Inelastic demand for hard/soft commodities > Increased costs of raw materials and therefore costs of production > Cost-push inflation
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    Can you still bring in the whole elastic demand terminology for macro? I am hoping for an A, my micro paper felt really good. I just struggle with the 12 markers as some of them e.g fiscal policy I like but some i find quite hard.
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    i am so scared for the 25 marker that is definitely the worst everything else is okay
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    Guys what are good websites to find multiple choice practice?
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    (Original post by jl00)
    Guys what are good websites to find multiple choice practice?
    Just do past papers from the old spec
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    (Original post by boinz)
    yes - but not much more than it happens and its bad.
    Not true necessarily. There's malign (bad) deflation caused by a decrease in AD, causing the price level to drop along with GDP. There's also benign (good) deflation caused by an increase in AS, causing the price level to drop while GDP actually rises.

    Not vital knowledge but could be very useful for getting A04 marks.
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    everyone revise monetary policy people are saying that it is definitely coming up maybe a 25 marker
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    Hi I need help to know what to put in my conclusion, what points should I always make for example the opportunity cost and ...


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    (Original post by BirdIsWord)
    If its high inflation relative to main trading partners, then yes thats effectively appreciation of domestic currency.

    When its lower inflation relative to trading partners, thats effectively depreciation.
    Not sure this is correct. If domestic inflation is high relative to our trading partners then surely the value of our currency in real terms will have fallen more than the value of theirs, making our currency worth less comparatively, hence representing a depreciation of domestic currency, not appreciation?
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    What formulas do we need to know ??
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    (Original post by Mitch3622)
    Hi I need help to know what to put in my conclusion, what points should I always make for example the opportunity cost and ...


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    Opportunity cost is more for micro, just talk about the impacts of the conflicting macroeconomic objectives you will have discussed in the previous paragraph and link everything back to the question
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    (Original post by Mitch3622)
    Hi I need help to know what to put in my conclusion, what points should I always make for example the opportunity cost and ...


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    the oppurtunity cost- conflicting macro objectives, time lag, wage price spiral caused from increased inflation. State a different policy e.g supply side policies e.g training would be best to improve unemployment and the occupation immobility of labour
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    Community Assistant
    Welcome Squad
    Come and join my thread, guys! http://www.thestudentroom.co.uk/show...1#post65060991
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    (Original post by jn998)
    Not sure this is correct. If domestic inflation is high relative to our trading partners then surely the value of our currency in real terms will have fallen more than the value of theirs, making our currency worth less comparatively, hence representing a depreciation of domestic currency, not appreciation?
    No..
    I'm right. I don't understand what you're saying.
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    (Original post by BirdIsWord)
    No..
    I'm right. I don't understand what you're saying.
    http://www.economicsonline.co.uk/Glo...Inflation.html
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    I hope you're not trying to prove me wrong. It literally says

    "The balance of payments may deteriorate because domestic inflation stimulates import spending, given that imports appear relatively cheaper, and dampens export sales, as exports appear more expensive abroad."
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    (Original post by BirdIsWord)
    I hope you're not trying to prove me wrong. It literally says

    "The balance of payments may deteriorate because domestic inflation stimulates import spending, given that imports appear relatively cheaper, and dampens export sales, as exports appear more expensive abroad."
    You are incorrect - if inflation is higher in a country compared to the rest of the world, its exchange rate will deteriorate. Even though imports increase when domestic inflation increases, it's not because of an increased exchange rate: it's because prices are higher domestically. Even though imports will increase if the exchange rate increases, an increase in imports doesn't necessarily mean that the exchange rate has increased, as many factors come into play when imports vary.

    Additionally, the increase in imports following the inflation of domestic prices depreciates the currency even further, as many people are competing to "sell off" or swap their domestic currency for foreign currencies, increasing the supply of the domestic currency and lowering the value of it.

    Nowhere in the article that you shared with us does it say that domestic inflation increases the exchange rate, it only says that imports will increase when this occurs. As I said, an increase in demand for imports does not necessarily mean that the domestic currency has appreciated (which in the case of inflation, it has done the opposite).
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    (Original post by DanCampbell1998)
    You are incorrect - if inflation is higher in a country compared to the rest of the world, its exchange rate will deteriorate. Even though imports increase when domestic inflation increases, it's not because of an increased exchange rate: it's because prices are higher domestically. Even though imports will increase if the exchange rate increases, an increase in imports doesn't necessarily mean that the exchange rate has increased, as many factors come into play when imports vary.

    Additionally, the increase in imports following the inflation of domestic prices depreciates the currency even further, as many people are competing to "sell off" or swap their domestic currency for foreign currencies, increasing the supply of the domestic currency and lowering the value of it.

    Nowhere in the article that you shared with us does it say that domestic inflation increases the exchange rate, it only says that imports will increase when this occurs. As I said, an increase in demand for imports does not necessarily mean that the domestic currency has appreciated (which in the case of inflation, it has done the opposite).
    do you understand what 'effectively' means? Or am i being trolled right now xddd
 
 
 
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