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    Just some thing i keep seeing in the mark sceme that i don't grasp fully. Why does a current account deficit mean exchange rate value would fall?

    I know there would be less confdence in the economics etc but are there any more reasons?
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    Evaluation - who cares about the size of the budget deficit?
    We are not bound by the Growth and Stabilty Pact like the rest of europe - <3% of GDP

    Btw jayshah, can you explain the crowding out bit. I have a rough idea but not the best
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    (Original post by TomTeeTom)
    Just some thing i keep seeing in the mark sceme that i don't grasp fully. Why does a current account deficit mean exchange rate value would fall?

    I know there would be less confdence in the economics etc but are there any more reasons?
    Off-topic: Are you in some way connected with Sierra Leone (just noticed the flag)? I went there this October.
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    (Original post by TomTeeTom)
    Just some thing i keep seeing in the mark sceme that i don't grasp fully. Why does a current account deficit mean exchange rate value would fall?

    I know there would be less confdence in the economics etc but are there any more reasons?
    Current account deficit, in rough terms, is due to a rise in imports and a fall in exports. Hence, as imports rise more pounds are being supplied and as exports fall fewer pounds are being demanded.

    Draw S/D, new equilibrium price is lower than before ...

    a.k.a advantages of a floating ER; partial automatic correction of the BoP
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    (Original post by DaveParlour)
    Low, thank God. 58/100 for an A in 2008 I believe, and I think it was 62/100 in 2007.
    wow that is low. It's given me a bit of hope :woo:

    (Original post by Grape190190)
    Unit 4 is definitely the hardest. In January at least, the time they gave us to do the paper was completely inadequate, and all the theory gave me a headache.
    I prefer the multiple choice + explanation ones to the writing ones. I thought unit 5 was the most annoying, because there were loads of vague things that we were supposed to put down to get marks. Lucky that this year's paper was good though. Section B of unit 6 seems OK, just doing what the question says and adding some evaluation. There's so much stuff to learn though
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    Argh I cant find my calculator, do we need it for unit 6?
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    (Original post by Stefano46)
    Btw jayshah, can you explain the crowding out bit. I have a rough idea but not the best
    There is one bank, they hold £1000. Me and you go to borrow £500 each, everyone is happy, we get the money, bank gets interest. Now, suppose the bank has £1000 again but the government comes and borrows £500. What happens? We both want £500 but only one of us will get it. The interest rates will rise as a result of a shortage of money supply - supply and demand.

    Feel free to correct me/ask questions if I'm wrong.
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    (Original post by iPod)
    Argh I cant find my calculator, do we need it for unit 6?
    I doubt it. Unless you're going to say examples like 3.1% servicing interest on a £1,000,000,000 debt is £x, it'd be handy then. Good to have I'd say.
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    (Original post by Dan?)
    I prefer the multiple choice + explanation ones to the writing ones. I thought unit 5 was the most annoying, because there were loads of vague things that we were supposed to put down to get marks. Lucky that this year's paper was good though. Section B of unit 6 seems OK, just doing what the question says and adding some evaluation. There's so much stuff to learn though
    I was worried about unit 5 for exactly that reason - that the content is a bit thin, so it's impossible to figure out what random information they're trying to extract from you. But question 2 was so nice I almost cried with happiness.

    I prefer section A of unit 6. It has the simplest structure ever for an essay. a) Point, evaluate, point, evaluate, point. b) point, evalauate, point, evaluate, point, evaluate, point. Job done.
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    (Original post by jayshah31)
    I doubt it. Unless you're going to say examples like 3.1% servicing interest on a £1,000,000,000 debt is £x, it'd be handy then. Good to have I'd say.

    Ah yes that would be awful without a calculator :eek:

    I should go hunt for it under the stacks and stacks of past papers in my room lol!
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    (Original post by Grape190190)
    I prefer section A of unit 6. It has the simplest structure ever for an essay. a) Point, evaluate, point, evaluate, point. b) point, evalauate, point, evaluate, point, evaluate, point. Job done.
    I really hope this is all we need, because that's all I'm going on :o:

    What statistical data do you know? Browsing some mark schemes has random things like "The deficit in country x is lower than country y" which is scaring me a bit.
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    (Original post by Stefano46)
    Evaluation - who cares about the size of the budget deficit?
    We are not bound by the Growth and Stabilty Pact like the rest of europe - <3% of GDP

    Btw jayshah, can you explain the crowding out bit. I have a rough idea but not the best
    If the budget deficit is larger then there are implications for future spending (government won't be able to spend more on NHS, Health, etc in the future). Implications are not just structural as the government won't be able to engage good counter-cyclical demand management anymore. Also, the government has to finance the debt (has to pay interest payments), as the PSNCR adds to the national debt the government has to pay more and more in interest - this leeches money from public finances. Also, since '97 when MPC was given an inflation target, the debt won't be eroded by high inflation - hah, infact risks of deflation can increase the national debt in real terms.

    Tax cuts may be seen as temporary if the budget is in a crap position; so people won't respond to it. Confidence will fall in the economy (if the governmetn can't control it as shown by the deficit) so a lack of FDI, and general investment. The central bank may also find it harder to sell bonds at prevailing premiums on the market as investors will demand higher premiums due to lack of confidence in the government paying it back. The MPC could find that it will lose control of interest rates; the market will not buy bonds at the itnerest rate the MPC wants.

    Crowding out will occur if the government chooses to spend more, and to finance that increases taxes (ceteris paribus) and so the amount that expenditure rises by is 0 as the private sector will spend less.
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    (Original post by iPod)
    Ah yes that would be awful without a calculator :eek:

    I should go hunt for it under the stacks and stacks of past papers in my room lol!
    Having said that, if you just said "it's a vast sum, and there is a large opportunity cost involved" I don't think they'll care really. They are more interested in the economic arguments as opposed to whether you can plug large numbers into a calculator

    But good luck in your hunt
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    Most of my friends prefer section a but I seem to find B alot easier
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    (Original post by jayshah31)
    I really hope this is all we need, because that's all I'm going on :o:

    What statistical data do you know? Browsing some mark schemes has random things like "The deficit in country x is lower than country y" which is scaring me a bit.
    Erm, none?
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    (Original post by Grape190190)
    Erm, none?
    Okay, good

    Not good because you know none, but because we both know equally as much
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    (Original post by seby1230)
    If government defecit does come up is it worth mentioning that golden rule that Gordon Brown used to go on about in the answer?
    Yes (the Golden Rules) were set to bring about confidence in the economy; to encourage investment giving the illusion that all is well and your money won't vanish if you invest it in this country.

    The government's budget position shows that it cannot manage the economy (debateable) and confidence will be low - making MP ineffective, tax cuts less effective, etc.

    Although you could argue whether appearing 'safer' relatively to other countries is more important in attracting investment rather than appearing safe in absolute terms. If everything is crap, but they are worse than us then we might still get it.
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    (Original post by iPod)
    Argh I cant find my calculator, do we need it for unit 6?
    Yes last year the first question was to calculate imports as a value of GDP from a table.
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    (Original post by jayshah31)
    Okay, good

    Not good because you know none, but because we both know equally as much
    :p:

    I mean, there's obvious stuff, like, "Hey, you know, I think China probably has a healthier looking trade in goods on the current account than us."
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    (Original post by Grape190190)
    :p:

    I mean, there's obvious stuff, like, "Hey, you know, I think China probably has a healthier looking trade in goods on the current account than us."
    Very true :p:

    I didn't mean those though
 
 
 

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