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    What is the link between PPP/Inflation and exchange rates,
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    (Original post by Shar-Sharaff)
    Thanks...of course this is helpful...and if you don't mind can you explain me Advantages and dis of the HDI in making comparisons between countries
    Ok before you start analysing its better to ask your self what is HDI.

    HDI is a tool used by the UN to rank countries from 0-1 in order of their economic and social development.
    It looks into 3 components:
    1)Life expectancy at birth
    2)Years of schooling for adults aged 25 and expected years of schooling for children of school entering age.
    3)GNI per capita at PPP

    So what are the problems:
    Ok the quality of teaching is really important. The schooling in a country can be 100% but if the teachers are not well trained or if they don't have the resources to teach does that mean that the country in question is developed?

    HDI just like economic growth gives a very little sense of income distribution.
    When we talk about per capita we are talking about average so it isn't really accurate.

    Also it is really poor way to measure quality of life - citizens in some countries do not have political freedom to express their opinions and sometimes this might be more valuable to an individual than having a Phd or even environmental issues.

    On the other hand:
    Data is cheap and easier to collect.
    HDI is a sign of welfare - if one country has high HDI chances are that there has been investment in education and welfare (shifts the AS) we can also use this to compare the policies adopted by each country. For example how did country A achieve high HDI and how did country B do it. We can also use it to see if the government has been successful with their policy.

    You can evaluate saying that
    what is the best measurement? each measurement has its own ups and downs, and you can say that it depends on what we are looking at. If we are looking for health development then yes HDI might be a good measurement but there are other measurements such as HPI we could use to measure poverty and GDI to consider relative inequality between male and female in the economy.
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    (Original post by Amydx6)
    Can anyone tell me what the difference between CPI and RPI is and why the figures are always so dramatically different?
    RPI includes mortgage interest repayments which constitute a huge proportion of households' disposable income
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    Guys can u giv me the the ans for June 2009 Q2 (b) (ii) (Edexcel)
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    (Original post by QwertyG)
    What is the link between PPP/Inflation and exchange rates,
    Lets take it step by step:

    1.High inflation could mean that interest rate are going to rise so we can control the price levels.
    2.High interest rates will attract foreign direct investors (FDI) or hot money.
    3.They would want to invest in UK banks so they would start to exchange their money for sterling.
    4.This pushes up the value of sterling and hence it becomes stronger relative to other currencies.

    Hope this explains it.
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    (Original post by cham_E)
    so nice of you ppl for responding my thread!!!

    there is a less chance of asking questions about unemployment and economic growth. but u know the high chance is for confliction between objectives and something related to government objectives... according to my prediction one question about ILO and Claimant count will be asked.. but i dunno much about both of them. can u guys help me..
    also that RPI and CPI may ask!! but i dunno what it is.. only few information i have with me!!
    Don't forget that's there two questions in the paper which increases the chance of you getting a nicer 30 marker of your choice! I hope something like Unemployment or Growth does come up where it say 'Discuss how macroeconomics policies could be used to reduce employment or achieve growth' as you can talk about any you want
    RPI just includes mortgage interest repayments so it's more volatile, whereas CPI does not.
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    guys I don't understand how investment can have a demand side and supply side effect.
    Would really appreciate if someone could explain this to be.
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    (Original post by hannah1258)
    just wondering what the points for fiscal and monetary would be and theyre evaluations so far i would put:

    FISCAL - Increase gov spending
    - lower income tax
    - lower corporation tax


    MONETARY - lower interests rates

    not sure of the eval points yet any ideas?
    Monetary Policy could also be increasing/decreasing the Money Supply then you could bring QE into it which would get complex.
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    For the second question where you have to compare and analyse some numerical data, will stating the peak and comparing with the other peak and then stating the lowest point and comparing with the other lowest point get you all the marks ?
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    (Original post by ineedtorevise127)
    guys I don't understand how investment can have a demand side and supply side effect.
    Would really appreciate if someone could explain this to be.
    Ok investment (I) is part of the AD equation. AD = C+I+G+NX
    so therefore increase in AD. I hope you're fine with that part.

    Lets take an example a factory:
    Lets say the factory wants to increase its capacity by opening up another factory. To do so they would have to invest! What does that mean they have increase the productive potential of the economy or in simple words they have increase the LRAS.


    Hence in the short run it will have an affect on AD and in the long run affect on the LRAS!
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    I'm hoping one of you can help!! This is a re-sit for me after getting 86 UMS last June (hoping for those extra few marks to take the pressure off unit 4). As far as I'm aware, my knowledge is all there.
    Do any of you find the edexcel mark schemes to be somewhat ambiguous? I find a lot of the answers are completely unrelated!
    Let me give you an example:

    January 2012 Question 2, b:
    (iii) In light of the information provided, assess the case for an increase in the base interest rate set by the Monetary Policy Committee.

    The extract goes on about how inflation is too high. Looking at this question, I'd make the point that higher interest rates => increased saving => reduced consumption and business investment (cost of loans too high) => decrease AD => lower inflation... therefore perhaps a successful policy to adopt by the MPC.

    However, the mark scheme states this:

    KAA 8 marks
    2 reasons (2 x 4 marks)
    • Inflation is above the MPC’s target and tolerance
    • Important to stop inflationary expectations taking hold and further fuelling
    inflation
    • Lowering relative inflation should increase international competitiveness
    • Stronger pound would reduce impact of cost push inflation
    2 marks could be awarded for a diagram which develops the analysis
    Evaluation 4 marks (2 x 2 marks or 1 x 4 marks)
    • Greater concern about potential deflationary spiral if consumption collapses
    • Most factors are temporary
    • Unions not powerful enough to create wage price spiral
    • Raising interest would strengthen sterling and reduce exports’ competitiveness
    and further weaken AD
    • Significance of gradient of curves


    To me this seems completely unrelated?!

    Can anyone please advise as to how that question would link to those answers?!

    Thanks
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    (Original post by pythagorean)
    For the second question where you have to compare and analyse some numerical data, will stating the peak and comparing with the other peak and then stating the lowest point and comparing with the other lowest point get you all the marks ?
    and a good definition.
    So if you are comparing data on budget deficit, before you read the data tell the examiner what a budget deficit is.
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    (Original post by studenthelp1)
    I'm hoping one of you can help!! This is a re-sit for me after getting 86 UMS last June (hoping for those extra few marks to take the pressure off unit 4). As far as I'm aware, my knowledge is all there.
    Do any of you find the edexcel mark schemes to be somewhat ambiguous? I find a lot of the answers are completely unrelated!
    Let me give you an example:

    January 2012 Question 2, b:
    (iii) In light of the information provided, assess the case for an increase in the base interest rate set by the Monetary Policy Committee.

    The extract goes on about how inflation is too high. Looking at this question, I'd make the point that higher interest rates => increased saving => reduced consumption and business investment (cost of loans too high) => decrease AD => lower inflation... therefore perhaps a successful policy to adopt by the MPC.

    However, the mark scheme states this:

    KAA 8 marks
    2 reasons (2 x 4 marks)
    • Inflation is above the MPC’s target and tolerance
    • Important to stop inflationary expectations taking hold and further fuelling
    inflation
    • Lowering relative inflation should increase international competitiveness
    • Stronger pound would reduce impact of cost push inflation
    2 marks could be awarded for a diagram which develops the analysis
    Evaluation 4 marks (2 x 2 marks or 1 x 4 marks)
    • Greater concern about potential deflationary spiral if consumption collapses
    • Most factors are temporary
    • Unions not powerful enough to create wage price spiral
    • Raising interest would strengthen sterling and reduce exports’ competitiveness
    and further weaken AD
    • Significance of gradient of curves


    To me this seems completely unrelated?!

    Can anyone please advise as to how that question would link to those answers?!

    Thanks
    Same thing with me , I had a problem with that question, I was so confident of my answer and they put completely unrelated stuff such as gradient of curves.:confused:
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    (Original post by studenthelp1)
    I'm hoping one of you can help!! This is a re-sit for me after getting 86 UMS last June (hoping for those extra few marks to take the pressure off unit 4). As far as I'm aware, my knowledge is all there.
    Do any of you find the edexcel mark schemes to be somewhat ambiguous? I find a lot of the answers are completely unrelated!
    Let me give you an example:

    January 2012 Question 2, b:
    (iii) In light of the information provided, assess the case for an increase in the base interest rate set by the Monetary Policy Committee.

    The extract goes on about how inflation is too high. Looking at this question, I'd make the point that higher interest rates => increased saving => reduced consumption and business investment (cost of loans too high) => decrease AD => lower inflation... therefore perhaps a successful policy to adopt by the MPC.

    However, the mark scheme states this:

    KAA 8 marks
    2 reasons (2 x 4 marks)
    • Inflation is above the MPC’s target and tolerance
    • Important to stop inflationary expectations taking hold and further fuelling
    inflation
    • Lowering relative inflation should increase international competitiveness
    • Stronger pound would reduce impact of cost push inflation
    2 marks could be awarded for a diagram which develops the analysis
    Evaluation 4 marks (2 x 2 marks or 1 x 4 marks)
    • Greater concern about potential deflationary spiral if consumption collapses
    • Most factors are temporary
    • Unions not powerful enough to create wage price spiral
    • Raising interest would strengthen sterling and reduce exports’ competitiveness
    and further weaken AD
    • Significance of gradient of curves


    To me this seems completely unrelated?!

    Can anyone please advise as to how that question would link to those answers?!

    Thanks
    Your answer is fine, remember that the MS gives the answer which is said by most candidates.
    For example I remember a question where they asked to define GDP at constant price but they were giving marks to those who were defining GDP because thats what the majority were doing.
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    (Original post by IbrahimB)
    Just about finished my unit 1 in the nick of time.
    I couldn't even finish my unit 1 completely.
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    (Original post by Soufflegirl)
    Would subsidies and improving healthcare count as supply-side policies?


    This was posted from The Student Room's iPhone/iPad App
    Yh as evaluation for healthcare you can say that, increased government expenditure may be absorbed into increased wages for staff which may not necessarily increase productivity and expand on that and subsidies you could use Unit 1 knowledge I'm guessing
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    (Original post by dan94adibi)
    Lets take it step by step:

    1.High inflation could mean that interest rate are going to rise so we can control the price levels.
    2.High interest rates will attract foreign direct investors (FDI) or hot money.
    3.They would want to invest in UK banks so they would start to exchange their money for sterling.
    4.This pushes up the value of sterling and hence it becomes stronger relative to other currencies.

    Hope this explains it.
    Thanks! I understand step 2,3 and 4 but how does high inflation cause a higher interest rate??
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    (Original post by QwertyG)
    Thanks! I understand step 2,3 and 4 but how does high inflation cause a higher interest rate??
    Bank of England's main objective is to keep inflation in its target. If prices are rising faster than their target, what tools do they have to control it?
    Money Supply and Interest rate.
    Money supply is always risky and Central Banks tend not to touch it so interest rates are likely to be manipulated.
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    (Original post by QwertyG)
    Thanks! I understand step 2,3 and 4 but how does high inflation cause a higher interest rate??
    If you have high inflation you would obviously want to lower it, right? A way of lowering the inflation rate would be to increase the interest rate because, increasing the interest rate forces people to spend less and save more. Remember, when people spend less the prices of goods goes down as demand goes down - this causes a drop in price level and thus lower inflation.
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    Never got taught this but saw it in a book, what is the Accelerator? And how is it linked to investment?
 
 
 
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