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Question spotting for F585 Economics The Global Economy OCR A level June 2011 watch

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    (Original post by mqt)
    i have a question! ...could you explain to me a reserve currency please
    Isn't that where a country holds a lot of another ones currency? I'm not entirely sure about what this does or reasons why it's good, I think it must lower the cost of trade as you don't have to go through transaction costs and it can be used to pay off debt to other countries but I don't really get why you can't just do the latter by exchanging your domestic currency. I don't think it'll be more than a 4 mark question in the exam and will be surprised if it comes up, as they don't really refer to it in the pre-release. I'll ask my teacher about it tomorrow.
    Sorry I couldn't be more helpful.
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    (Original post by simonc1993)
    Isn't that where a country holds a lot of another ones currency? I'm not entirely sure about what this does or reasons why it's good, I think it must lower the cost of trade as you don't have to go through transaction costs and it can be used to pay off debt to other countries but I don't really get why you can't just do the latter by exchanging your domestic currency. I don't think it'll be more than a 4 mark question in the exam and will be surprised if it comes up, as they don't really refer to it in the pre-release. I'll ask my teacher about it tomorrow.
    Sorry I couldn't be more helpful.
    Thank you! that was actually really useful ...my teacher just said somthing along the lines of holding currency and that was it! and i asked again and she repeated! thank you! kind of refreshed my memory and i get it more now ...

    Right now i'm looking at monetary policy transmission mechanism. I wrote how, due to lack of convergence, countries going in and out of recession at different times and some suffered deeper recessions, it is very difficult for the ECB, as lowering the interest rate will effect the countries differnetly. But then i went on to an example, as the ecb lowered the interest rate to 1% from 4.25% in spring 2009. But by spring 2009, many were recovering from the recession and only three countries were still in recession. So a low interest rate woul be positive for all the countries?...so i'm really confused. Could you help unpick it for me please i'm sure you'll know something i'm missing! it's supposed to be a fairly long answer too. I defined Monetary policy transmission mechanism and stated the role of the ecb then went on to talk about monetary policy and the effect during the recession pretty much

    Thanks! lol! obviously you don't have to answer the whole thing, but it's useful stuff! thanks he he
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    (Original post by mqt)
    Thank you! that was actually really useful ...my teacher just said somthing along the lines of holding currency and that was it! and i asked again and she repeated! thank you! kind of refreshed my memory and i get it more now ...

    Right now i'm looking at monetary policy transmission mechanism. I wrote how, due to lack of convergence, countries going in and out of recession at different times and some suffered deeper recessions, it is very difficult for the ECB, as lowering the interest rate will effect the countries differnetly. But then i went on to an example, as the ecb lowered the interest rate to 1% from 4.25% in spring 2009. But by spring 2009, many were recovering from the recession and only three countries were still in recession. So a low interest rate woul be positive for all the countries?...so i'm really confused. Could you help unpick it for me please i'm sure you'll know something i'm missing! it's supposed to be a fairly long answer too. I defined Monetary policy transmission mechanism and stated the role of the ecb then went on to talk about monetary policy and the effect during the recession pretty much

    Thanks! lol! obviously you don't have to answer the whole thing, but it's useful stuff! thanks he he
    A low interest rate is only really a good thing for the three countries still in a recession and those only just emerging out. Countries with high economic growth or who are comfortably out of a recession will be looking to raise interest rates to control inflation (as economic growth also creates inflation, and for countries whose AD curve meets the LRAS curve where the LRAS curve is vertical (if that makes sense) will only get inflation from an increase in AD.)
    What exactly is the question you're answering?
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    (Original post by simonc1993)
    A low interest rate is only really a good thing for the three countries still in a recession and those only just emerging out. Countries with high economic growth or who are comfortably out of a recession will be looking to raise interest rates to control inflation (as economic growth also creates inflation, and for countries whose AD curve meets the LRAS curve where the LRAS curve is vertical (if that makes sense) will only get inflation from an increase in AD.)
    What exactly is the question you're answering?
    Oh yes, good point, so i should really look at the figures for the Q2, and Q3 of 2009 and not just Q4 2009. It would probably make it easier to evaluate. Although, even though you've been through 6 months of recovery, would you still consider that to be comfortable? i'm sure they're still working on it lol
    yep get you...But for countries whose AD curve meets the LRAS? Could you give me an example please? Could I can't imagine any of them to meet the LRAS curve just coming out of recession. ? or i'm confused lol

    The question is: Explain with reference to the monetary policy transmission mechanism, how the ECB control inflation in the Eurozone. What are the issues of this for national economies in the Eurozone?

    I think my teacher is just picking out things she things will be extremely relevant and good to get our essay writing in practice i guess... have you done nay yet?
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    (Original post by mqt)
    Oh yes, good point, so i should really look at the figures for the Q2, and Q3 of 2009 and not just Q4 2009. It would probably make it easier to evaluate. Although, even though you've been through 6 months of recovery, would you still consider that to be comfortable? i'm sure they're still working on it lol
    yep get you...But for countries whose AD curve meets the LRAS? Could you give me an example please? Could I can't imagine any of them to meet the LRAS curve just coming out of recession. ? or i'm confused lol

    The question is: Explain with reference to the monetary policy transmission mechanism, how the ECB control inflation in the Eurozone. What are the issues of this for national economies in the Eurozone?

    I think my teacher is just picking out things she things will be extremely relevant and good to get our essay writing in practice i guess... have you done nay yet?
    I'd say probably yes, as there tends to be a bit of a time lag before monetary policy kicks in, but you may want to mention somthing along those lines anyway.
    It's kind of hard to explain what I mean with AD and LRAS without a diagram, sorry :/
    I guess I'd tackle this question by explaining how raising interest rates helps combats inflation, maybe drawing an Average Eurozone AD/LRAS curve to show how this would work and why it is necessary. Then talk about how this forces the countries still in recession to use fiscal policy to get out of debt, creating a huge budget deficit. And then maybe say that countries, like Spain in extract 3, who are trying to grow but have a huge debt (so they can't use fiscal measures) and are restrained by the fixed high interest rate (so they can't use monetary policy,) are now forced to use Supply Side policy, which takes a long time to have an effect.
    This might not be much to right a really long essay on, how many marks is the question?
    We had a couple of mock questions in class before the Easter holiday but we never got them back, which is probably just as well seeing how atrocious my first one was.
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    (Original post by simonc1993)
    I'd say probably yes, as there tends to be a bit of a time lag before monetary policy kicks in, but you may want to mention somthing along those lines anyway.
    It's kind of hard to explain what I mean with AD and LRAS without a diagram, sorry :/
    I guess I'd tackle this question by explaining how raising interest rates helps combats inflation, maybe drawing an Average Eurozone AD/LRAS curve to show how this would work and why it is necessary. Then talk about how this forces the countries still in recession to use fiscal policy to get out of debt, creating a huge budget deficit. And then maybe say that countries, like Spain in extract 3, who are trying to grow but have a huge debt (so they can't use fiscal measures) and are restrained by the fixed high interest rate (so they can't use monetary policy,) are now forced to use Supply Side policy, which takes a long time to have an effect.
    This might not be much to right a really long essay on, how many marks is the question?
    We had a couple of mock questions in class before the Easter holiday but we never got them back, which is probably just as well seeing how atrocious my first one was.
    Oh! thanks that ws super useful actually!...i'm really bad at planning! but that sounds like it covered like everything! i've already written almost three quarters of a page or so, but i kinda feel like planning it properly and then re-writting it now! hope you ace the exams btw! hahah
    she didn't mention marks, but said it would be long. I've got economics tomorrow so i'll sk
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    I'm getting really nervous about this paper for some reason!! Can anyone give me about 3 or 4 bullet points about problems caused by a lack of convergence? thankyou!!!
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    (Original post by ASDFGHJKLQWERTYUIO)
    I'm getting really nervous about this paper for some reason!! Can anyone give me about 3 or 4 bullet points about problems caused by a lack of convergence? thankyou!!!
    Sure thing ...you should probably ask your teacher for the tutor2u toolkit. When i got hold of it, my teacher was handing them out anyways. it's pretty useful... and! this forum has been super useful, cause i asked about it on here first so i got it really easy in class

    Well, you need to know convergence first. Here's a definition from my book actually:

    Economic convergence is the process by which economic conditions in different countries become similar. Economists distinguish between monetary convergence (for example, similarities in inflation and interest rates) and in real convergence (for example, similarities in the structure of economies). In the case of the EU, to be a member, you will need monetary convergence.

    But in the stimulus, we find out that there is a lack of convergence in the economic cycles. This therefore means the countries are all reacting differently to the global crisis, which is evident as some go in to recession first, some have deeper recessions or even longer recessions. This lack of convergence in the EU is particularly a problem because they all have the same monetary policy and therefore the interest rates across all countries are the same. Therefore, the interest rate could benefit some countries boosting economic activity, whereas for some countries, it will just continue to create inflationary pressures.

    I'm not really sure what else there is though sorry.. i'll keep reading and see if i find something
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    Hey, btw, that question i told you about,
    Explain with reference to the monetary policy transmission mechanism, how the ECB control inflation in the Eurozone. What are the issues of this for national economies in the Eurozone?

    I asked my teacher and she told me, the first part of that question could easily be 10 marks and you really explain monetary policy transmission mechanism in depth. Just thought you'd like to know. Do you have any mock questions that I could have a go at please?
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    (Original post by mqt)
    Sure thing ...you should probably ask your teacher for the tutor2u toolkit. When i got hold of it, my teacher was handing them out anyways. it's pretty useful... and! this forum has been super useful, cause i asked about it on here first so i got it really easy in class

    Well, you need to know convergence first. Here's a definition from my book actually:

    Economic convergence is the process by which economic conditions in different countries become similar. Economists distinguish between monetary convergence (for example, similarities in inflation and interest rates) and in real convergence (for example, similarities in the structure of economies). In the case of the EU, to be a member, you will need monetary convergence.

    But in the stimulus, we find out that there is a lack of convergence in the economic cycles. This therefore means the countries are all reacting differently to the global crisis, which is evident as some go in to recession first, some have deeper recessions or even longer recessions. This lack of convergence in the EU is particularly a problem because they all have the same monetary policy and therefore the interest rates across all countries are the same. Therefore, the interest rate could benefit some countries boosting economic activity, whereas for some countries, it will just continue to create inflationary pressures.

    I'm not really sure what else there is though sorry.. i'll keep reading and see if i find something




    thankyouuu!!! thats really helpful! yes i'll ask my teacher for the toolkit, he has only given us the expected questions so far
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    Just one more question.. i know trade liberalisation is meant to reduce poverty and help human development but are there any evaluative points against this?
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    (Original post by mqt)
    Sure thing ...you should probably ask your teacher for the tutor2u toolkit. When i got hold of it, my teacher was handing them out anyways. it's pretty useful... and! this forum has been super useful, cause i asked about it on here first so i got it really easy in class
    Is there any chance you could email me the toolkit please? Or did your teacher give it to you in paper form?
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    (Original post by ASDFGHJKLQWERTYUIO)
    Just one more question.. i know trade liberalisation is meant to reduce poverty and help human development but are there any evaluative points against this?
    You could argue the extent to which it may reduce poverty - it may be inequal with some benefiting at the expense of others and although absolute poverty may improve, relative poverty may worsen. It will also depend on the degree to which the domestic contry can complete on the global market and if they are competitiveness/have a sufficient comparative advantage, otherwise this may undermine their ability to compete.
    I hope this helps
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    (Original post by ASDFGHJKLQWERTYUIO)
    Just one more question.. i know trade liberalisation is meant to reduce poverty and help human development but are there any evaluative points against this?
    yes - look at prebisch singer hypothesis (i believe it is mentioned in the toolkit)
    also a lot of the money that is invested in the country as a result of trade doesn't trickle down to the poorest people. many of the leaders are corrupt or are uninformed and will spend the money on palaces and such
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    (Original post by simonc1993)
    Is there any chance you could email me the toolkit please? Or did your teacher give it to you in paper form?
    sure inbox me your email ...she sent it to us through email, although, someone on here sent it to me anyways
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    (Original post by mqt)
    sure inbox me your email ...she sent it to us through email, although, someone on here sent it to me anyways
    haha, don't worry, someone else sent it to me half an hour ago
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    I'm genuinely scared of this exam. :afraid:
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    thankyou both thats really helpful!
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    (Original post by simonc1993)
    haha, don't worry, someone else sent it to me half an hour ago
    oh right lol no worries..i had sent it anyways...
    btw, do you know how a low interest rate causes a depreciation of the exchange rate?

    Hey, btw, that question i told you about,
    Explain with reference to the monetary policy transmission mechanism, how the ECB control inflation in the Eurozone. What are the issues of this for national economies in the Eurozone?

    I asked my teacher and she told me, the first part of that question could easily be 10 marks and you really explain monetary policy transmission mechanism in depth. Just thought you'd like to know. Do you have any mock questions that I could have a go at please?
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    (Original post by mqt)
    oh right lol no worries..i had sent it anyways...
    btw, do you know how a low interest rate causes a depreciation of the exchange rate?

    Hey, btw, that question i told you about,
    Explain with reference to the monetary policy transmission mechanism, how the ECB control inflation in the Eurozone. What are the issues of this for national economies in the Eurozone?

    I asked my teacher and she told me, the first part of that question could easily be 10 marks and you really explain monetary policy transmission mechanism in depth. Just thought you'd like to know. Do you have any mock questions that I could have a go at please?
    If interest rates are low, then 'hot money' (money invested into the UK by other countries) leaves the UK as investors get a smaller return for their money. This means our currency's demand will fall and supply will rise. This will cause the value ('price') of our currency to depreciate (it helps if you draw a demand/supply diagram to see how this works.) And it works vice versa for a rise in interest rates.
    And cheers for the tip on the monetary policy question. I'm afraid I don't have any but I noticed there's some in the back of the tutor2u guide, not to sure how accurate they are. I think my college is typing up a couple of mock tests, one I'm doing in a couple of weeks, so I'll email them to you once they're on my college website.
 
 
 

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