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    How would the UK current account improve in the near future? It's currently at a trade deficit.
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    (Original post by applebanana123)
    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?
    https://www.youtube.com/watch?v=abVrZXjJH0Y
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    (Original post by amelienine)
    How would the UK current account improve in the near future? It's currently at a trade deficit.
    It is unlikely anything will improve in the near future. The current account deficit is not a problem, as long as the government can finance the deficit. In the case of the UK, the government is credit worthy, so can easily finance the deficit.

    However a current account deficit may be a problem, as it shows that a country is not 'paying it's way'. Can lead to long term decline of the export sector as the whole economy is based on imports.

    If the Government decided that it was a priority to improve the current account deficit they could:
    • Monetary policy to change interest rates. i.e Lowering interest rates would reduce hot money (foreign saving money in UK banks). This would reduce demand for the pound. Causing depreciation. This would make imports more expensive, improving the current account balance.
    • Policies to reduce price level (e.g contractionary fiscal or contractionary monetary) hence making exports cheaper and more competitive. Increased exports improve current account balance.
    • Tariffs on Imports to reduce demand for imports
    • Improve exports: e.g customer service, high quality goods, unique products... All of which would make exports more competitive, improving current account balance. Germany is an example of a country with a current account surplus as a result of non-price factors
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    (Original post by harryleavey)
    It is unlikely anything will improve in the near future. The current account deficit is not a problem, as long as the government can finance the deficit. In the case of the UK, the government is credit worthy, so can easily finance the deficit.

    However a current account deficit may be a problem, as it shows that a country is not 'paying it's way'. Can lead to long term decline of the export sector as the whole economy is based on imports.

    If the Government decided that it was a priority to improve the current account deficit they could:
    • Monetary policy to change interest rates. i.e Lowering interest rates would reduce hot money (foreign saving money in UK banks). This would reduce demand for the pound. Causing depreciation. This would make imports more expensive, improving the current account balance.
    • Policies to reduce price level (e.g contractionary fiscal or contractionary monetary) hence making exports cheaper and more competitive. Increased exports improve current account balance.
    • Tariffs on Imports to reduce demand for imports
    • Improve exports: e.g customer service, high quality goods, unique products... All of which would make exports more competitive, improving current account balance. Germany is an example of a country with a current account surplus as a result of non-price factors
    Thank you for the answer, one more thing, what do you mean when you say that the government is credit worthy?
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    (Original post by amelienine)
    Thank you for the answer, one more thing, what do you mean when you say that the government is credit worthy?
    http://www.tradingeconomics.com/united-kingdom/rating

    Can the economy borrow easily to finance the imports?
    It is the same as if a citizen wants to borrow some money to finance the purchase of a good. They will not be able to borrow if they have a poor credit rating.

    UK government has an AAA credit rating. (the best)
    Although it is worsening... (I think the US has the best rating?)
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    (Original post by harryleavey)
    http://www.tradingeconomics.com/united-kingdom/rating

    Can the economy borrow easily to finance the imports?
    It is the same as if a citizen wants to borrow some money to finance the purchase of a good. They will not be able to borrow if they have a poor credit rating.

    UK government has an AAA credit rating. (the best)
    Okay, thank you!
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    (Original post by amelienine)
    Attachment 536143 How would you calculate the change in unemployment over the period shown?


    Posted from TSR Mobile
    I literally have no idea with this one. I fully understand the cumulative part. I am not getting 600,000 (The answer in the book).

    Sorry
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    (Original post by harryleavey)
    I literally have no idea with this one. I fully understand the cumulative part. I am not getting 600,000 (The answer in the book).

    Sorry
    Sorry, meant a change in * employment.

    Yeah, I don't understand how the book got 600,000 either.
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    Are government policies the same as macroeconomic objectives?
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    (Original post by amelienine)
    Are government policies the same as macroeconomic objectives?
    Nope, but they are related.
    Macro Objectives:
    • Trade performance (current account)
    • Stable inflation (2%)
    • Economic growth
    • Employment
    • Redistribution of Income
    • Environment
    • Budget balanced
    Government policies aim to meet these macro objectives:
    • Monetary Policy e.g to achieve stable inflation
    • Fiscal Policy e.g to Balance budget
    • Supply Side Policy e.g to achieve employment
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    What is the formula used to calculate real gdp?
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    (Original post by Diastal)
    What is the formula used to calculate real gdp?
    (Nominal GDP / CPI inflation(index) ) * 100

    Here is a question for you:

    Calculate the real GDP for 2009 and 2010. Has Real GDP increased or decreased?

    Name:  screen_shot_2015-12-05_at_134158-151726124A006693018-thumb400.png
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Size:  7.3 KB
    Spoiler:
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    Real GDP: (nominal/CPI)*100
    2009:Real GDP: (100/120)*100= 83.32010:Real GDP: (130/150)*100= 86.7This is an increase in real GDP
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    (Original post by harryleavey)
    (Nominal GDP / CPI inflation(index) ) * 100

    Here is a question for you:

    Calculate the real GDP for 2009 and 2010. Has Real GDP increased or decreased?

    Name:  screen_shot_2015-12-05_at_134158-151726124A006693018-thumb400.png
Views: 110
Size:  7.3 KB
    Spoiler:
    Show
    Real GDP: (nominal/CPI)*100
    2009:Real GDP: (100/120)*100= 83.32010:Real GDP: (130/150)*100= 86.7This is an increase in real GDP
    We dont need to know that
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    (Original post by Hot&SpicyChicken)
    We dont need to know that
    Real GDP increased from 83.33% to 86.67%
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    (Original post by Hot&SpicyChicken)
    We dont need to know that
    Yes we do. Take a look at the specification: page 12
    http://qualifications.pearson.com/co...c-August14.pdf

    a) Rates of change of real GDP as a measure of economic growth

    Ignore the attached image
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    (Original post by harryleavey)
    http://www.tradingeconomics.com/united-kingdom/rating

    Can the economy borrow easily to finance the imports?
    It is the same as if a citizen wants to borrow some money to finance the purchase of a good. They will not be able to borrow if they have a poor credit rating.

    UK government has an AAA credit rating. (the best)
    Although it is worsening... (I think the US has the best rating?)
    Nope, quite sure the S&P rating for the US has gone down to AA+
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    (Original post by rosemondtan)
    Nope, quite sure the S&P rating for the US has gone down to AA+
    Oh, ok. Thanks for the update.

    Obviously it depends on the rating system you look at though. According to S&P the US has a poorer rating than the UK. According to TE, US has 3rd best.
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    (Original post by harryleavey)
    Oh, ok. Thanks for the update.

    Obviously it depends on the rating system you look at though. According to S&P the US has a poorer rating than the UK. According to TE, US has 3rd best.
    True, only followed the S&P though
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    (Original post by rosemondtan)
    True, only followed the S&P though
    The TE is a combination of S&P and all of the other ratings.
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    Could someone explain how the state of the world economy affects net trade.
 
 
 
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