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    (Original post by Beatz16)
    That my friend is spot on...that should definately guarantee 4 marks...however is there a huge importance of relating questions to present situations?
    hmm not really, but it sometimes makes your answer more lengthy. (which is an advantage for me as my 30 marker hardly fills a page up LOL)
    Relating to the present situation shows the examiner you're more aware and although you don't get extra credit you can use your knowledge to make your argue more appealing or think of extra evaluations.

    Whenever I talk about fiscal policy and how the govt increasing spending increases AD I always say: This may not be possible as the govt already have a large fiscal deficit and are in debt etc

    Also, you can say how monetary policy is not effective in increasing economic growth as interest rates have been at their lowest since 2009 at 0.5%, this means the monetary policy can no longer be used so we must rely on fiscal and supply side policies
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    Does anyone have any tips on how to NOT run out of time?! I always run out of time and end up rushing. Timing is quite crucial.

    Also, this may seem like a silly question but how do I know whether to draw the SRAS or LRAS?! Diagrams are my weakest point, gah!
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    (Original post by Boy_wonder_95)
    Never got taught this but saw it in a book, what is the Accelerator? And how is it linked to investment?
    accelerator effect - the principle states that a given change in demand for consumer goods will cause a greater percentage change in demand for capital goods

    Basically, Consider an industry where demand is rising at a strong pace.
    -Firms will respond to growing demand by expanding production and making fuller use of their existing productive capacity. They may also choose to meet higher demand by running down their stocks of finished products.

    If they feel that the higher level of demand will be sustained – they may choose to increase spending on capital goods such as plant and machinery, factories and new technology in order to increase their capacity. If this investment goes beyond what is needed simply to replace worn out, fully depreciated machinery, then the capital stock of the business will become larger.

    A good example might be the surge in capital investment in wind turbines due to the super-high level of oil and gas prices and a rising market demand for renewable energy. In this case, strong demand created a positive accelerator effect. But this can also go into reverse e.g. during an economic slowdown or recession. World oil prices have collapsed and many wind farm projects have been scaled back or postponed.

    Similarly the sharp fall in UK motor car production is also leading to a reverse accelerator effect with planned investment spending subject to severe cut-backs and many jobs lost.
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    (Original post by EyesWideShut)
    Does anyone have any tips on how to NOT run out of time?! I always run out of time and end up rushing. Timing is quite crucial.

    Also, this may seem like a silly question but how do I know whether to draw the SRAS or LRAS?! Diagrams are my weakest point, gah!
    do the 30 marker first, without a doubt. It is worth around a third of the marks!! This is the one you don't want to run out of time on!
    And remember, the four markers are so simple. You can obtain 4 marks in 2 sentences - definition then use of data. Don't waffle!
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    (Original post by tigerz)
    accelerator effect - the principle states that a given change in demand for consumer goods will cause a greater percentage change in demand for capital goods

    Basically, Consider an industry where demand is rising at a strong pace.
    -Firms will respond to growing demand by expanding production and making fuller use of their existing productive capacity. They may also choose to meet higher demand by running down their stocks of finished products.

    If they feel that the higher level of demand will be sustained – they may choose to increase spending on capital goods such as plant and machinery, factories and new technology in order to increase their capacity. If this investment goes beyond what is needed simply to replace worn out, fully depreciated machinery, then the capital stock of the business will become larger.

    A good example might be the surge in capital investment in wind turbines due to the super-high level of oil and gas prices and a rising market demand for renewable energy. In this case, strong demand created a positive accelerator effect. But this can also go into reverse e.g. during an economic slowdown or recession. World oil prices have collapsed and many wind farm projects have been scaled back or postponed.

    Similarly the sharp fall in UK motor car production is also leading to a reverse accelerator effect with planned investment spending subject to severe cut-backs and many jobs lost.
    Oh I see thanks! So basically the accelerator effort is similar to the multiplier effect it's to do with investment and capital goods. Is it more of a general point or an evaluation?
    And what does it depend on? For example multiplier depends on leakages.
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    (Original post by Boy_wonder_95)
    Never got taught this but saw it in a book, what is the Accelerator? And how is it linked to investment?
    Accelerator theory is when investment is driven by past or previous changes in people’s income.
    It comes from the Keynesian school of economics.
    What it says is that people wages go up, they want to consume more and demand will go up hence firms need to increase investment and increase capacity.
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    Guys... can U please help to make me full understand of the following to evaluate any answer..
    .Discussion of the size of the multiplier
    .Time lag Effects
    .Depends on the shape or the AS curve
    .Other things might not be equal.....
    PLEASE CAN U HELP ME.... I NEED TO GET FULL EVALUATION MARKS AS WELL AS KAA MARKS...cox i didn't do my unit one Well
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    (Original post by Shar-Sharaff)
    Guys... can U please help to make me full understand of the following to evaluate any answer..
    .Discussion of the size of the multiplier
    .Time lag Effects
    .Depends on the shape or the AS curve
    .Other things might not be equal.....
    PLEASE CAN U HELP ME.... I NEED TO GET FULL EVALUATION MARKS AS WELL AS KAA MARKS...cox i didn't do my unit one Well
    Okay, as you know evaluation is key.

    I assume you know what the multiplier effect is? All you need to talk about is how far these effects spread - i.e. they say a reduction in income tax will lead to increased disposable income, which will lead to increased consumption, business investment, thus AD... but will it get this far? etc...

    Time lags are very simple. You don't need to expand on them much to be honest. Lets take an example of education and training as a supply side policy. The time lags can be decades - it takes a while for people to become educated. Additionally, time may be spent on designing new schools etc, and these are not 5 minute jobs.

    The shape of the curves is talking about elasticities. For example, a shift in AD has a much higher effect on the price level when it is near full employment (when AS becomes more inelastic).

    And the final point reverts back to 'ceteris paribus' - i.e. all other things being equal. In your analysis, it is good to make this point. Going back to a previous example, a reduction in come tax, ceteris paribus, will lead to an increase in consumption. However, in your evaluation you can state that other things may not be equal. For example, interest rates may go up meaning mortgage repayments are higher, or VAT may go up meaning consumers will not spend more...
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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.
    Its what would be called a "bear trap". If I looked at it for the first time I would have done what you did. But then you have to consider the fact that it says "assess the case", this means it doesn't necessarily want the standard "what would a change in interest rates do to inflation?" but really they're asking "what reason would MPC have for changing the interest rates?"

    If you consider that then the mark scheme kinda makes more sense (I hope)
    Hope I helped!
    -NR
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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?
    there isn't too much difference between the 2....its just that RPI includes mortgage along in the calculation while CPI does not!!!
    mortgage tends to be extremely high hence there are large differences between the 2 indexes!!
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    I didn't sit the unit 1 exam in January but can anyone confirm that the essay (last question - 18 mark) question was on a subsidy?
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    (Original post by Boy_wonder_95)
    Oh I see thanks! So basically the accelerator effort is similar to the multiplier effect it's to do with investment and capital goods. Is it more of a general point or an evaluation?
    And what does it depend on? For example multiplier depends on leakages.
    The accelerator theory suggests that the level of net investment will be determined by the rate of change of national income. If national income is growing at an increasing rate then net investment will also grow.

    The accelerator effect will tend to be high when:
    -The rate change of consumer income and spending is strongly positive
    -The amount of spare productive capacity for businesses is low
    -The available supply of investment funds is high

    Evaluation:
    One criticism of this simple accelerator model is that the capital stock of a business can rarely be adjusted immediately to its desired level because of ‘adjustment costs’ and ‘time lags’. Adjustment costs include the cost of lost business due to installation of new equipment or the financial cost of re-training workers.
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    (Original post by NabRoh)
    Its what would be called a "bear trap". If I looked at it for the first time I would have done what you did. But then you have to consider the fact that it says "assess the case", this means it doesn't necessarily want the standard "what would a change in interest rates do to inflation?" but really they're asking "what reason would MPC have for changing the interest rates?"

    If you consider that then the mark scheme kinda makes more sense (I hope)
    Hope I helped!
    -NR
    I'm still not convinced in the slightest I'm afraid!
    The only part of the mark scheme I can see as relevant to the question is the fact that the inflation target is currently above the target rate set by the MPC, so it needs to be adjusted?

    Can you bullet point how you'd write an answer?

    Many thanks in advance
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    (Original post by Boy_wonder_95)
    Never got taught this but saw it in a book, what is the Accelerator? And how is it linked to investment?
    well you know how multiplier effect is when an increase in investment or any other component of aggregate demand cause a more than proportionate increase in income....

    well accelerator is when an increase in income causes a more than proportional change or increase in investment!!!
    you could say a reverse!
    well that is what i understood out of it....it was in the A2 section of my textbook but is part of AS
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    (Original post by ineedtorevise127)
    does anyone know where I can find a good definition list for ECON2?
    Heya, I've found this website very useful for unit 2 definitions! Hope it helps
    http://econsguide.blogspot.co.uk/201...aging.html?m=1
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    I have a mighty feeling that tomorrow we would get a question on fiscal and supply side policies!!!! they normally ask about monetary policy but i noticed that for this current summer 2013 exams they have been setting really different questions on topics that have rarely been asked!!

    I am sooo scared for tomorrow!!!
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    Increasing investment on education clashes with fiscal/ssp right? since government expenditure is required but AD and AS increases?
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    (Original post by studenthelp1)
    I'm still not convinced in the slightest I'm afraid!
    The only part of the mark scheme I can see as relevant to the question is the fact that the inflation target is currently above the target rate set by the MPC, so it needs to be adjusted?

    Can you bullet point how you'd write an answer?

    Many thanks in advance
    - The MPC has sole responsibility of controlling inflation within its target of 2%±1%
    - They have this target set to avoid the harsh consequences of inflation such as wage price spirals and shoe leather costs
    - The MPC would increase the interest rate to curb the aforementioned effects of increasing inflation
    eval) - Shoe leather costs may not be so high if little inflationary noise created
    eval) - Wage price spiral may not be so strong especially in a recession where workers do not have the power to demand higher wages in an economy where most are thankful for even having a job

    Don't know how many marks it was, but this should get you a fair few
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    (Original post by studenthelp1)
    Okay, as you know evaluation is key.

    I assume you know what the multiplier effect is? All you need to talk about is how far these effects spread - i.e. they say a reduction in income tax will lead to increased disposable income, which will lead to increased consumption, business investment, thus AD... but will it get this far? etc...

    Time lags are very simple. You don't need to expand on them much to be honest. Lets take an example of education and training as a supply side policy. The time lags can be decades - it takes a while for people to become educated. Additionally, time may be spent on designing new schools etc, and these are not 5 minute jobs.

    The shape of the curves is talking about elasticities. For example, a shift in AD has a much higher effect on the price level when it is near full employment (when AS becomes more inelastic).

    And the final point reverts back to 'ceteris paribus' - i.e. all other things being equal. In your analysis, it is good to make this point. Going back to a previous example, a reduction in come tax, ceteris paribus, will lead to an increase in consumption. However, in your evaluation you can state that other things may not be equal. For example, interest rates may go up meaning mortgage repayments are higher, or VAT may go up meaning consumers will not spend more...
    Wow...this is really helpful...but im stll confused with the SHAPE OF AS CURVE..... for eg. because of expansionary fiscal policy, it leads to an increase in injections, MPC and so on.... and what can i write in evaluation saying epends on the shape of AS curve....??
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    (Original post by QwertyG)
    Increasing investment on education clashes with fiscal/ssp right? since government expenditure is required but AD and AS increases?
    Investment in education is a SSP and a form of government spending. This could effect monetary policy if MD > MS and interest rates subsequently increase.
    It works in tandem with loose fiscal where an increase in GS is on the cards anyway

    -NR
 
 
 
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