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    is public secor net cast requirement capital? :confused:
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    (Original post by ayandutta)
    under eval, it says SS policy may not work if exchange rate os over valued. any1 know the link ?
    If the sterling exchange rate is over valued, British exports will seem relatively more expensive and foreigners won't demand them, hence the deficit. No matter what the government does to improve the supply side, foreigners won't demand our exports if the price is too high and the good/service can be obtained more cheaply elsewhere.
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    (Original post by jacy_babi)
    is public secor net cast requirement capital? :confused:
    PSNCR is also known as PSBR and is another term for fiscal deficit. If the government is spending more than it receives in taxes, it will need to borrow money. This is referred to as the PSNCR.
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    sorry i got it wrong. is public sector net investment capital?
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    (Original post by jacy_babi)
    sorry i got it wrong. is public sector net investment capital?
    PSNCR=Public Sector Net Cash Requirement
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    hey guys what do we need to know about balance of payments, if someone could post all the key links with other topics as well such as exchange rate being affected etc, would be much appreciated, also what is the marshall lerner condition as i do not understand it
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    (Original post by rg2005)
    what do we need to know about balance of payments
    Check specification. But you basically need to know the components of the BoP (current, financial and to a lesser extent, capital accounts) and what affect them (exchange rates, interest rates, FDI, etc.)

    what is the marshall lerner condition as i do not understand it
    The Marshall Lerner condition states that for a currency devaluation to be successful in improving a current account deficit,

    PED(X) and PED(M) both have to be greater than 1 (elastic).
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    (Original post by Sports Racer)
    Check specification. But you basically need to know the components of the BoP (current, financial and to a lesser extent, capital accounts) and what affect them (exchange rates, interest rates, FDI, etc.)



    The Marshall Lerner condition states that for a currency devaluation to be successful in improving a current account deficit,

    PED(X) and PED(M) both have to be greater than 1 (elastic).
    Actually it is the sum of their PEDs, i.e. PED of exports + PED of imports > 1.
    if someone could post all the key links with other topics as well such as exchange rate being affected etc
    Exchange rates (XR) affect Balance of Payments (BoP) and BoP affects XR. When XR falls, British exports become cheaper and imports into the UK become more expensive. As a result, demand for imports fall and demand for exports rises ---> smaller BoP deficit.
    The opposite is true when the XR rises (Lower exports, higher imports --->deficit worsens)

    On the other hand demand for British goods is a determinant of the XR itself. When tehre is increased demand for British exports, there is also increased demand for Pound (since the foreigners need to buy pounds to buy British goods.) Ceteris paribus, £ appreciates. The reverse is true if there is a rise in demand for imports. People sell more pounds to buy foreign currency in order to purchase imports and the supply of £ increases ----> depreciation.

    More importantly don't forget the links between export industries and employment, inflation and economic growth.
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    (Original post by The Dark Side)
    Actually it is the sum of their PEDs, i.e. PED of exports + PED of imports > 1.
    Perhaps I misphrased it. The condition is indeed PED(X) + PED(M) > 1

    but the following is WHY it works:

    Value of sterling falls:
    P(M) goes up
    if PED(M) > 1 (elastic) => D(M) goes down

    P(X) goes down
    if PED(X) > 1 (elastic) => D(X) goes up

    ... which was what I was getting at.
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    (Original post by hmjessop)
    If the sterling exchange rate is over valued, British exports will seem relatively more expensive and foreigners won't demand them, hence the deficit. No matter what the government does to improve the supply side, foreigners won't demand our exports if the price is too high and the good/service can be obtained more cheaply elsewhere.
    but SS policies are ment to imprve competitiveness, hence prices. maybe in SR exports not demanded, but in LR they will be !?
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    (Original post by hmjessop)
    If the sterling exchange rate is over valued, British exports will seem relatively more expensive and foreigners won't demand them, hence the deficit. No matter what the government does to improve the supply side, foreigners won't demand our exports if the price is too high and the good/service can be obtained more cheaply elsewhere.
    Hence the need for supply-side policies which lower costs ---> lower prices. If the costs of production can be lowered enough, the negative effects of the high value of the £ may be overcome.
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    anyone care to explain why trading blocs may NOT drive globalisation? is it because of trade diversion?
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    Does anyone happend to have a copy of an essay wich has received a fairly good mark that they might have either typed up or could scan in? - just so I can see what sort of thing I'm aiming for as I have taught myself this subject and could benefit from something that has been marked by a teacher!

    Much appreciated. Thanks
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    (Original post by newlife)
    anyone care to explain why trading blocs may NOT drive globalisation? is it because of trade diversion?
    External tariffs etc = difficult to import into blocs

    Eval = The tariffs may encourage FDI within the bloc itself as MNCs bypass tarriffs, fuelling Gbstn even more.

    Anyone feel free to correct me, I just wanna input to a thread Ive take a fair amount out of.
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    (Original post by Curious888)
    External tariffs etc = difficult to import into blocs

    Eval = The tariffs may encourage FDI within the bloc itself as MNCs bypass tarriffs, fuelling Gbstn even more.

    Anyone feel free to correct me, I just wanna input to a thread Ive take a fair amount out of.
    I would argue along those lines. Trade blocs lead to regionalisation rather than globalisation in my opinion.
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    Aye, I would also stick in "Fortress Europe" somewhere, and lack of comparative advantage, using key terms is a quick way of impressing an examiner and upping your marks.
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    nice one curious 888... can you develop more on the ''fortress europe'' term though? first time ive come across it.

    one more question, theres a 60 marker asking the economic implications of a fall in competitiveness for the UK. the only point i can seem to make is a worsened balance of paymen deficit.
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    Hi all, I got a couple of questions:

    What exactly is Gordon's "golden fiscal rule"? What does it consist of/what does it mean? How do you evaluate it?

    What are the five economic tests? Why are they important? Why does Gordon have them? How do you evaluate them?

    I really need to know this as I never got the hang of them throughout upper sixth.

    Thanks in advance guys and I'll try to help others too!
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    (Original post by newlife)
    nice one curious 888... can you develop more on the ''fortress europe'' term though? first time ive come across it.

    one more question, theres a 60 marker asking the economic implications of a fall in competitiveness for the UK. the only point i can seem to make is a worsened balance of paymen deficit.
    Increased unemployment - declining manufacturing industries

    Lower growth - manufactruing makes a disproportionate contribution to trade/growth/employment/innovation.


    Higher inflation - lower demand for British exports (decreased demand for £)+increased imports as the local industries can't compete = inflation.
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    (Original post by nka389)
    What exactly is Gordon's "golden fiscal rule"? What does it consist of/what does it mean? How do you evaluate it?
    "The Government has also specified two key fiscal rules that accord with the principles. These are:

    the golden rule: over the economic cycle, the Government will borrow only to invest and not to fund current spending; and
    the sustainable investment rule: public sector net debt as a proportion of GDP will be held over the economic cycle at a stable and prudent level."

    To evaluate it, say that it has an adverse affect on government spending and will it benefit our standard of living in the long run?
 
 
 

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