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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 nik2111)
    can someone say how countries can gain competiveness i got
    exchange rate devalueing
    interest rate low
    unit labour costs
    economic growth- going up
    banks are confident to loan

    evaulation
    devaulation long run lead to imports going up cost push
    economic growth could mean high inflation in the buiness cycle mite reduce competivness
    business confidence


    anyone got better/ more ideas?
    They can't devalue the currency through the exchange rate of reduce the interest rate if they're in the Eurozone, so that policy is straight away removed.
    -Extreme situation but the PIIGS could possibly leave the Eurozone to gain full access over these policies again to restore competitivness.

    Erm,
    I think supply side is the only way if part of a single currency union.
    Don't quote me on this though.
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    (Original post by Iram0105)
    Analyse impacts of liberalisation on international trade??

    any ideas...
    =)
    trade creation this can be shown on diagram were the tariff is reduced and imports increase

    economies of scale countries can specialse in single products and it could be cheaper when mass producing

    exports countries may be able to export more which could be a good muliplier effect draw a diagram

    firms will have more competition from abroad and thus be more competitive

    however

    industrys could collapse if they cannot compete with new competition

    if this is done through a free trade area or a union then countries may set common external tariffs to non members so it could lead to trade diversion

    in relation to development developing countries may face unequal wealth distribution which means trade wont be good

    theres a few more but i forget some of them...
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    (Original post by rs91)
    thanx, we can use that as an evaluative point, to say that the stability and growth pacy and requirement to control gov't spending which is essential for the continued success of the euro is undermining?
    yeah, just state how it should work (analysis) e.g. can't go over 3% of GDP for budget deficit

    then evaluative would be: however, it doesn't always work as france and germany..... etc etc
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    (Original post by xChelsea)
    They can't devalue the currency through the exchange rate of reduce the interest rate if they're in the Eurozone, so that policy is straight away removed.
    -Extreme situation but the PIIGS could possibly leave the Eurozone to gain full access over these policies again to restore competitivness.

    Erm,
    I think supply side is the only way if part of a single currency union.
    Don't quote me on this though.
    they can use fiscal policies but then they are restricted with the stability and growth pact so the most sustainable way is indeed the supply side policies
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    (Original post by xChelsea)
    They can't devalue the currency through the exchange rate of reduce the interest rate if they're in the Eurozone, so that policy is straight away removed.
    -Extreme situation but the PIIGS could possibly leave the Eurozone to gain full access over these policies again to restore competitivness.

    Erm,
    I think supply side is the only way if part of a single currency union.
    Don't quote me on this though.
    yh i was thinking in genaral but yh in the EU it really depends on the stage each country is in the economic cycle and wether they have inflation which would raise unit labour costs
    and goverments decisons on fiscal policys .
    also external shocks and levels of borrowing(balance of payments position) ?
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    (Original post by rs91)
    they can use fiscal policies but then they are restricted with the stability and growth pact so the most sustainable way is indeed the supply side policies
    This may sound stupid but, how can fiscal policies help improve competitiveness?
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    (Original post by rs91)
    they can use fiscal policies but then they are restricted with the stability and growth pact so the most sustainable way is indeed the supply side policies
    this is a really good evaulation point to make when asked about how effective fiscal policys are in the EU
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    (Original post by xChelsea)
    This may sound stupid but, how can fiscal policies help improve competitiveness?
    increased government expenditure on new schools etc, then people get a better education, more efficient, reduce unit of labour cost

    reduce tax e.g. VAT, may get goods cheaper, reduce cost push inflation, reduce unit of labour cost

    both would then be more competitive i think?

    not too sure, does it sound rihgt?
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    (Original post by xChelsea)
    This may sound stupid but, how can fiscal policies help improve competitiveness?
    i rekon it can cause AD to increase(through cuts in taxes) which will then lead to employment going up as there is more demands for goods and services this will mean banks will start lending more as people are able to pay it back through there jobs. if banks are lending more then business confidence in that economy will be good and thus cause competitiveness>?> its a long shot im probly wrong lol

    i think a more straight forward arguemnt would be that goverment spending on training for example could lead to more productivity per worker and thus bring unit labour costs down?

    im not to sure but i can try lol .
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    With regards to the Trade Liberalisation theme, It can be summarised like this:

    WTO talks about how the financial crisis has contracted world trade as major economies aggregate demand has fallen. The WTO argue that whilst developed countries try and use fiscal policies to recover, this is only a short term solution, and that to sustain long term growth countries need to focus on world trade. During a financial crisis, countries tend to become very protectionist in order to preserve their own economies. However this protectionism adversely affects world trade.

    Protectionist methods include Tarriffs, Domestic Subsidies, Non-Tarriff Measures and Anti-Dumping Actions.

    Advantages of protectionism are that it can protect senile and infant industries, preserve domestic jobs, prevent dumping, and protect from cheap labour.

    However the disadvantages of protectionism is that you lose the benefit of specialisation and economies of scale, which leads to lower prices. Consumers also have reduced choice, it can lead to a lack of innovation and also it can lead to retaliation.

    The WTO argue trade barriers should be reduced and that world trade should be liberalised and made free. This would increase the level of trade on an international scale.

    The benefits of increased world trade are access to larger markets, increased allocative, productive and dynamic efficiency due to competiton. Also access to new technology, and the trading of ideas which can lead to further information. Finally increased trade can raise living standards, as evidence has shown that countries which are more open to trade grow faster over the long run that those who remain closed. And increased trade means countries can grow beyond their domestic maximum capacity, therefore increasing their income per head.

    There are of course drawbacks to increased trade which need to be considered. These include the danger to infant and senile industries which may not be able to compete on an international level. Also increased specialisation can lead to countries relying too much on specific industries, which can cause problems if demand suddenly drops. Also, trade can lead to dumping. Another drawback is that as countries open up more to trade, their economies performance becomes more reliant on foreign performance, so they are more vulnerable to external shocks.

    However, the advantages of increased world trade outweigh the disadvantages. International Trade liberalisation is vital for the long term recovery of world economies.

    This is the point where I get stuck, because I do not have any evaluative points, and I know the 20 mark question requires a lot of evaluation. Please provide some evaluation points to finish this essay.
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    (Original post by xChelsea)
    This may sound stupid but, how can fiscal policies help improve competitiveness?
    fiscal policies refer to taxes and government spending, so gov't spending via subsidies will increase competitivness, lower cost of production, decrease in taxes, eg income and corporation will mean increased investment in better quality technology thus increasing quality of goods and thus competitiveness?
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    (Original post by rs91)
    fiscal policies refer to taxes and government spending, so gov't spending via subsidies will increase competitivness, lower cost of production, decrease in taxes, eg income and corporation will mean increased investment in better quality technology thus increasing quality of goods and thus competitiveness?
    decrease in corporation tax could staight away lead to more competivness e.g people shifting money abroad from the UK to aviod the tax man
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    (Original post by rs91)
    fiscal policies refer to taxes and government spending, so gov't spending via subsidies will increase competitivness, lower cost of production, decrease in taxes, eg income and corporation will mean increased investment in better quality technology thus increasing quality of goods and thus competitiveness?
    I think referring to fiscal policy as government spending on subsidies, although correct, is dangerous because you will start getting mixed up between short term fiscal policy and long term supply side policies.

    Try and keep the two separate.

    Fiscal Policy = Altering taxes and government spending to influence aggregate DEMAND

    Supply side policies = Policies to shift LRAS to the right. Government will fund these policies.

    Refer to fiscal policy as government spending to influence demand, and not supply.
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    (Original post by boliver228)
    I think referring to fiscal policy as government spending on subsidies, although correct, is dangerous because you will start getting mixed up between short term fiscal policy and long term supply side policies.

    Try and keep the two separate.

    Fiscal Policy = Altering taxes and government spending to influence aggregate DEMAND

    Supply side policies = Policies to shift LRAS to the right. Government will fund these policies.

    Refer to fiscal policy as government spending to influence demand, and not supply.
    thank you for this, i never really realised it before
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    (Original post by nik2111)
    decrease in corporation tax could staight away lead to more competivness e.g people shifting money abroad from the UK to aviod the tax man
    never thought of things that way, this is why i love TSR
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    (Original post by rs91)
    thank you for this, i never really realised it before
    No worries. Now can someone please suggest some evaluation points for a question discussing the effect of increased trade liberalisation.
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    (Original post by boliver228)
    I think referring to fiscal policy as government spending on subsidies, although correct, is dangerous because you will start getting mixed up between short term fiscal policy and long term supply side policies.

    Try and keep the two separate.

    Fiscal Policy = Altering taxes and government spending to influence aggregate DEMAND

    Supply side policies = Policies to shift LRAS to the right. Government will fund these policies.

    Refer to fiscal policy as government spending to influence demand, and not supply.
    What if it's investment because that can influence AD & AS?
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    (Original post by boliver228)
    No worries. Now can someone please suggest some evaluation points for a question discussing the effect of increased trade liberalisation.
    yeah sure, i think the biggest one that i consider is that although liberalisation will help LEDC's economy it may not fully increase their standard of living, as it does not have an impact on HDI, ie literacy rates etc, it may tackle poverty but will it really improve QUALITY of life, eg life expectancy
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    What are the benefits and implications of an increase in Exports through trade
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    Nine mock exams (with answers) plus associated notes - I can send them to you if you pmessage me with email address.

    Send them on to whoever you wish.

    One major catch!

    Visit here:

    http://www.gecodia.com/Europe-excl-U...owth_r121.html

    How come the figures here do not match those in the case study?

    I assume it is real gdp when the case study talks about peak to trough - but if it is nominal then that too does not match those figures.

    No-one has yet to answer this incongruity.

    Give me a decent answer and I will sleep tonight....but before I do I will send you the 9 mocks with answers and associated stuff I have collected.

    It could be the saving of you PLUS surely criticism of the table is 'evaluation'?

    :-0

    The 9 mocks etc will be sent out at midnight....if a suitable answer to the above is found.

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