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    (Original post by lidiya)
    Any ideas about the EU question guys?
    I think it could be regarding the UK leaving because at the time the paper was written there was discussion about it. Not sure though.
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    (Original post by Kieran?)
    Here's something that my teacher made for our class outlining what has come up in the previous years. Plus at the bottom she has made her predictions for what will come up for this year. Obviously there's no guarantee that it's going to be correct but she did correctly predict one of the topics in both the unit 2 and 3 exams in january.
    this is really useful!
    Run out of rep today but will rep you when I can
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    I have a question about the balance of payments, is the main structure of it the current account and financial account ? do the direct overseas investment, portfolio invest, long term and short term capital flows all come under the financial account side?

    thanks !! =)
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    Also can some please explain the J-curve? Does it show that devaluation may worsen deficit in the short run but will eventually work in the Long run ? thank you!! =)
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    (Original post by phoebe230253)
    Also can some please explain the J-curve? Does it show that devaluation may worsen deficit in the short run but will eventually work in the Long run ? thank you!! =)
    This is exactly what it's showing, yeh! In the short run, the BoP defecit will worsen because the devaluation still means that all goods ordered before the devaluation still have to paid for, and it now costs more because the pound has gone down in value (weak pound, imports dearer, exports cheaper). After the currency rebalances itself (long run), there will be more domestic demand for exports because they are cheaper now and imports will decrease because they're now more expensive, so the BoP defecit improves. Remember the Marshall-Lerner condition though i.e. a devaluation may not necessarily lead to an improvement of the BoP defecit, PED for imports must be inelastic (where they are not a necessity, to allow people to switch to domestically produced goods when import prices are high). If imports have inelastic demand, a devaluation (weak pound, imports dearer) is unlikely to have an effect on import demand, because consumers will still buy imports, even if the price of them is high. Hope this helps!
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    (Original post by phoebe230253)
    I have a question about the balance of payments, is the main structure of it the current account and financial account ? do the direct overseas investment, portfolio invest, long term and short term capital flows all come under the financial account side?

    thanks !! =)
    Financial account is long term (portfolio investment and FDI from other countries into the UK) and short term capital flows (hot money), so yes, you're right, and that is all that comes under Financial. The Capital account is unimportant for this Unit 4 but you must understand it's capital from people leaving and entering the UK, and any Government transfers out of the country, like for foreign aid to other countries. The current account is everything else you have learn, so the balance of trade in goods and services, net income flows (investments, profits etc from our firms in other countries coming back to the domestic country, and investments, profits etc going from, for example, Malaysian firms which have set up in the UK going back to their home country), and lastly on the current account, current transfers, which is our transfers to organisations like the EU, which we make a contribution to because we are part of it (and a bloody large contribution at that, compared to some of the other countries in the EU!!!). Hope this helps, lovely!
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    Why can tariffs/removal of tarrifs be seen as a supply side policy?

    One of my teachers was talking about this a while back
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    I kind of think one of the questions will be geared around the UK adopting the euro as their currency. Does anyone else think this is likely?


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    ECON4 is so much less hassle than ECON3...
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    (Original post by RP-MRU.)
    ECON4 is so much less hassle than ECON3...
    I totally disagree! Haha it's so much harder to revise, what topics are you focusing on?


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    (Original post by kelbel1)
    Financial account is long term (portfolio investment and FDI from other countries into the UK) and short term capital flows (hot money), so yes, you're right, and that is all that comes under Financial. The Capital account is unimportant for this Unit 4 but you must understand it's capital from people leaving and entering the UK, and any Government transfers out of the country, like for foreign aid to other countries. The current account is everything else you have learn, so the balance of trade in goods and services, net income flows (investments, profits etc from our firms in other countries coming back to the domestic country, and investments, profits etc going from, for example, Malaysian firms which have set up in the UK going back to their home country), and lastly on the current account, current transfers, which is our transfers to organisations like the EU, which we make a contribution to because we are part of it (and a bloody large contribution at that, compared to some of the other countries in the EU!!!). Hope this helps, lovely!

    thank you so much for answering my questions!!! it was really helpful =D!!! you knw how you said our current transfers to EU etc. that would be an outflow taking money out of our economy right?

    =) xxxxxxx
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    About taxation, what are the examples of regressive taxes? Is an example of flat tax, VAT? (Does it increase the problem of poverty and the distribution of income wealth ? xxxxx
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    (Original post by phoebe230253)
    About taxation, what are the examples of regressive taxes? Is an example of flat tax, VAT? (Does it increase the problem of poverty and the distribution of income wealth ? xxxxx
    Indirect taxes such as VAT are examples of regressive tax because the poorer pay a larger percentage of their income on these taxes. Other examples include council tax. The extent to which it increases the problem of poverty depends on the level of taxation set by governments on regressive and progressive taxes.

    It is argued that increasing progressive taxes will result in a more equitable distribution of income. However, if taxes are too progressive it may result in a loss of incentive within firms and could potentially increase absolute poverty, even if relative poverty is slightly reduced.
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    (Original post by phoebe230253)
    About taxation, what are the examples of regressive taxes? Is an example of flat tax, VAT? (Does it increase the problem of poverty and the distribution of income wealth ? xxxxx
    -VAT is regressive tax because poor people feel the impact more than rich people due to having to pay a bigger proportion of their income on VAT

    -In the UK the tax is like 20% of your income up to like £37k then 40% up to £150k then 50% over £150k making it progressive. So flat tax is when a country decides to have a certain percentage e.g 25% regardless of your income.

    Progressive tax tends to redistribute income from rich to poor, because rich people pay a higher percentage that pays for poor peoples welfare benefit

    VAT redistributes from the poor to the rich because the VAT money goes on things such as roads and airports that benefits the rich more than the poor
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    (Original post by charlie7wright)
    Indirect taxes such as VAT are examples of regressive tax because the poorer pay a larger percentage of their income on these taxes. Other examples include council tax. The extent to which it increases the problem of poverty depends on the level of taxation set by governments on regressive and progressive taxes.

    It is argued that increasing progressive taxes will result in a more equitable distribution of income. However, if taxes are too progressive it may result in a loss of incentive within firms and could potentially increase absolute poverty, even if relative poverty is slightly reduced.
    (Original post by CoolStoryBroo)
    -VAT is regressive tax because poor people feel the impact more than rich people due to having to pay a bigger proportion of their income on VAT

    -In the UK the tax is like 20% of your income up to like £37k then 40% up to £150k then 50% over £150k making it progressive. So flat tax is when a country decides to have a certain percentage e.g 25% regardless of your income.

    Progressive tax tends to redistribute income from rich to poor, because rich people pay a higher percentage that pays for poor peoples welfare benefit

    VAT redistributes from the poor to the rich because the VAT money goes on things such as roads and airports that benefits the rich more than the poor

    Thank you very much!!!
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    Hello, i have a problem understanding the second definition of full employment (the first one is the Beveridge's: when 3% of Labour Force is unemployed). They say that "full employment occurs at market clearing wage rate, at which the nr of workers wishing to work equals the nr of workers employers wish to hire" -quoted from the textbook. However, the labour marker can "clear" at many different points, not necessarily when the economy is not on it's PPF. By their second definition, if we are in a deep recession producing far from our LRAS Curve, we can still have full employment, considering the labour market clears. What am i missing?
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    sorry for the amount of questions but do the EU fiscal rules also apply to UK ? xxxxxxxxxxx
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    (Original post by KirilVlas)
    Hello, i have a problem understanding the second definition of full employment (the first one is the Beveridge's: when 3% of Labour Force is unemployed). They say that "full employment occurs at market clearing wage rate, at which the nr of workers wishing to work equals the nr of workers employers wish to hire" -quoted from the textbook. However, the labour marker can "clear" at many different points, not necessarily when the economy is not on it's PPF. By their second definition, if we are in a deep recession producing far from our LRAS Curve, we can still have full employment, considering the labour market clears. What am i missing?
    Full employment occurs when the number of people who are economically active are in work (ie. no involuntary unemployment). However, do not confuse full employment with 0 unemployment, because of frictional unemployment there will always be a time when there is some unemployed workers. If a country is in a deep recession, wage rates are usually lowered and so many people will not be willing to supply their labour at the current wage rate and are out of work voluntarily. In this case, if all those who were willing to supply their labour at the lower wage rate were in employment, the market would clear and full employment would be achieved.
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    (Original post by charlie7wright)
    Full employment occurs when the number of people who are economically active are in work (ie. no involuntary unemployment). However, do not confuse full employment with 0 unemployment, because of frictional unemployment there will always be a time when there is some unemployed workers. If a country is in a deep recession, wage rates are usually lowered and so many people will not be willing to supply their labour at the current wage rate and are out of work voluntarily. In this case, if all those who were willing to supply their labour at the lower wage rate were in employment, the market would clear and full employment would be achieved.
    Yes i am aware of the problems of structural and frictional unemployment, which will not allow unemployment figures to reach absolute 0. So if in a recession the market clears, full employment is achieved. But there is still spare capacity as we are not producing on the LRAS curve, which means we are not at full employment levels. The logic tells me that the full definition should be like this: Full employment is when labour market clears and no spare capacity exists (or we are producing on LRAS).
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    (Original post by KirilVlas)
    Yes i am aware of the problems of structural and frictional unemployment, which will not allow unemployment figures to reach absolute 0. So if in a recession the market clears, full employment is achieved. But there is still spare capacity as we are not producing on the LRAS curve, which means we are not at full employment levels. The logic tells me that the full definition should be like this: Full employment is when labour market clears and no spare capacity exists (or we are producing on LRAS).
    There is no spare capacity if the market clears.
 
 
 
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