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    (Original post by harryleavey;[url="tel:65030963")
    65030963[/url]]Ok
    An exchange rate is simply the value of one currency in terms of another.

    An export is more competitive if it is cheaper (or non price competition such as high quality export)

    An export is cheaper if the exchange rate depreciates. In other words if the £ decreases in value against another currency, our exports become cheaper for overseas consumers to buy.

    Cheaper exports mean they are more competitive in comparison to exports which are more expensive.

    So exports increase.


    (An exchange rate may depreciate if the demand for currency falls. Think of a Pound coin as a good. If less people demand the good, the price falls. Therefore in the case of exchange rates, if there is reduced demand for the currency e.g low interest rates, the exchange rate falls)
    Thank youu! That was really helpful. I understand it now. Are you an AS student btw?
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    (Original post by Diastal)
    Thank youu! That was really helpful. I understand it know. Are you an AS student btw?
    Yeah I'm AS
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    (Original post by rosemondtan;[url="tel:65031415")
    65031415[/url]]Basically, the economy is complicated. There are so many possible effects from one cause, which is why we have "tradeoffs". The analysis about increase in AD works because you can see it on the AD/AS Diagram. When you decrease interest rates, people naturally spend more and firms invest make as cost of borrowing falls. Therefore AD WILL increase and exchange rate increases, causing level of exports to decrease.

    However, if you consider monetary policy, this could conflict as a decrease in interest rates means foreign investors stand to get less money from putting in our banks (hot money) therefore, they will change their money to other currencies and this will cause the supply of pounds on the market to increase, resulting in a fall in the exchange rate and thus more competitive price of exports. This will cause level of exports to increase.
    Could you talk about this conflict as an evaluation point?
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    (Original post by Diastal)
    Could you talk about this conflict as an evaluation point?
    Yes you can
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    Does the level of productivity affect AS?
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    I have a question

    Food: weighting in the cpi basket 31.8%, annual percentage change in price 2.5%
    Non-food: weighting in the cpi basket 68.2%, annual percentage change in price 1.2%

    How do i calculate the annual cpi inflation rate from this figure?

    Thanks )
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    (Original post by xongose)
    I have a question

    Food: weighting in the cpi basket 31.8%, annual percentage change in price 2.5%
    Non-food: weighting in the cpi basket 68.2%, annual percentage change in price 1.2%

    How do i calculate the annual cpi inflation rate from this figure?

    Thanks )
    I take it that the base year is 100, so the price index for food is 102.5 at nominal prices and 101.2 for non food. Take (102.5 x 31.8) + (101.2 x 68.2) and divide the whole thing by 100. That should give you the price index. Subtract this from the base year of 100 and you get your inflation rate. ( I'm too lazy to get a calculator sorry)
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    (Original post by rosemondtan;[url="tel:65033649")
    65033649[/url]]I take it that the base year is 100, so the price index for food is 102.5 at nominal prices and 101.2 for non food. Take (102.5 x 31.8) + (101.2 x 68.2) and divide the whole thing by 100. That should give you the price index. Subtract this from the base year of 100 and you get your inflation rate. ( I'm too lazy to get a calculator sorry)
    If the price index for food is 102.5, wouldn't that mean that the price for food has risen by 2.5? How would you know if it's risen since it only says percentage change and not a decrease or increase in percentage
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    (Original post by Diastal)
    If the price index for food is 102.5, wouldn't that mean that the price for food has risen by 2.5? How would you know if it's risen since it only says percentage change and not a decrease or increase in percentage
    If it's a fall in prices, the percentage change will be negative. So it will be -2.5 and not 2.5. Unless OP means something else, then I don't know.
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    (Original post by rosemondtan)
    I take it that the base year is 100, so the price index for food is 102.5 at nominal prices and 101.2 for non food. Take (102.5 x 31.8) + (101.2 x 68.2) and divide the whole thing by 100. That should give you the price index. Subtract this from the base year of 100 and you get your inflation rate. ( I'm too lazy to get a calculator sorry)
    Can I just put:

    (2.5 x 31.8%) + (1.2 x 68.2%)

    Will that be ok?
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    (Original post by xongose)
    Can I just put:

    (2.5 x 31.8%) + (1.2 x 68.2%)

    Will that be ok?
    Yes, but only in this case because I assumed the base year was 100. It isn't always the case.
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    (Original post by rosemondtan)
    Yes, but only in this case because I assumed the base year was 100. It isn't always the case.
    So what if the bas year is 90?
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    (Original post by xongose;[url="tel:65034565")
    65034565[/url]]So what if the bas year is 90?
    Then do what you did but divide by 90 instead of 100 I believe
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    (Original post by Diastal)
    Then do what you did but divide by 90 instead of 100 I believe
    The index number would be 92.5 for example
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    Could someone explain what a price index and a base year is. I get so confused over them and mabye a worked example
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    (Original post by Bruce267099)
    Could someone explain what a price index and a base year is. I get so confused over them and mabye a worked example
    A base year just means the first year. Usually, the price index is 100 for the base year.

    So, Year 1 has a price index of 100.

    If the price index of Year 2 is 105, then that means that there is an inflation of 5% between the 2 years.
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    Name:  ImageUploadedByStudent Room1463904267.743352.jpg
Views: 147
Size:  126.5 KB How would you calculate the change in unemployment over the period shown?


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    Also, does anyone have a link to the June 2015 Unit 2 paper? I can't seem to find it online...


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    (Original post by amelienine)
    Also, does anyone have a link to the June 2015 Unit 2 paper? I can't seem to find it online...


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    Yeah I can't find them either.
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    Does anyone have like a list of UK government policies/economy statistics to use as application, other than the basic ones such as the current rate of inflation/economic growth/etc.?
    Seems pretty difficult to find 6 marks worth of application if the question is on effectiveness of fiscal policy/macroeconomic objectives.
    Also, what's the definition of a macroeconomic objective?
 
 
 
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