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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 ajayhp)
    Lol, this a stupid q, i know...

    Describe what is meant by economic performance (4 marks)

    Also:

    Comment on the extent to which Spain's dependence on the construction industry has led to a delayed economic recovery
    Economic performance is a measure used to compare countries using 4 different indicators: unemployment rate, real GDP growth, inflation rate, and the balance of payments position

    And for Spain, I talked about how Their negative real interest rate led to a boom in borrowings which increased AD in the short term leading to spain producing over its productive capacity (LRAS shifts to SRAS: positive output gap). Prices continued to rise which worsened the negative real interest rate which in turn increased the real cost of borrowing. The rising AD led to high inflation, both consumption and investment fell therefore so did AD, which increases the unemployment rate (keynesian diagram). Because of the increase of the real cost of borrowing increased, many houses were left unfinished which resulted in jobs lost in the construction industry. Around 15% of the Spanish GDP is created from the construction industry, so that will slows down Spain's recovery which in turn worsens the lack of convergency within the euro area.
    hope this helps
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    I'm probably just being stupid here but I have no idea how to answer this... :confused:

    One of the (suggested) questions on the toolkit says:

    Despite the difficulties experienced by the PIIIGS nations in recent years, the European single currency area has been a success. Discuss. (20 marks)
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    (Original post by ajayhp)
    yeh revisng for economics is very boring, i dunna why, where as science and maths are more interesting you learn new thing more
    this exam is dead
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    question on globalisation guaranteed to come up. mark my words
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    (Original post by Rakesh26)
    I'm probably just being stupid here but I have no idea how to answer this... :confused:

    One of the (suggested) questions on the toolkit says:

    Despite the difficulties experienced by the PIIIGS nations in recent years, the European single currency area has been a success. Discuss. (20 marks)
    Hi there, that seems a difficult question, it looks perhaps more like a 10 marker in my opinion, however ill probably answer it as follows:

    Talk about the problems(lack of convergance, failure off one size fits all)
    whether these economies would of sufffered even not in the EU( poor supply side)
    Initail short run success vs meltdown vs potential to grow strong again.
    The popularity of currency( 2nd most used according to the stimulus)
    strong economies doing OK such as germany.

    Then maybe conclude that it was good but perhaps grew to big to fast?

    Im not sure what else really, probably need more on why it would be a success.
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    do we have a choice for the essay questions? as in work and leisure
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    (Original post by tsr4life)
    do we have a choice for the essay questions? as in work and leisure
    Nope I don't you have a choice.
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    (Original post by Rakesh26)
    I'm probably just being stupid here but I have no idea how to answer this... :confused:

    One of the (suggested) questions on the toolkit says:

    Despite the difficulties experienced by the PIIIGS nations in recent years, the European single currency area has been a success. Discuss. (20 marks)
    In addition to 4011seb's points I would probably also talk about the advantages and disadvantages of a single currency and in the conclusion highlight the advantages (as it talks about how it could have been a success) and maybe mention that if the European Single Currency was made up of only the Core, it would probably be regarded as more successful, as the Core alone is closer to an Optimal Currency Area.

    Hope this helps
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    (Original post by FaithChild)
    In addition to 4011seb's points I would probably also talk about the advantages and disadvantages of a single currency and in the conclusion highlight the advantages (as it talks about how it could have been a success) and maybe mention that if the European Single Currency was made up of only the Core, it would probably be regarded as more successful, as the Core alone is closer to an Optimal Currency Area.

    Hope this helps
    That helps me cos i couldnt think of more on about it being a success.
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    (Original post by ExplosiveHamster)
    hey guys, can anyone explain the differences/definition of

    1) the budget account
    2) the current account
    3) the balance of payment
    4) the balance of trade

    i keep getting them mixed up and don't really know what each one is
    can anybody help? :angelblush:
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    (Original post by ajayhp)
    Also what are the methods of keeping government borrwing incontrol (6marks)

    I wrote fiscal rules like the Uk has a "golden rule" only borrow for investment and the EU has the SGP that states that the annual government budget deficit should not be no more than 3% of GDP. that is all i can think of any1 else
    It kinda refers to supply side policies...

    If a country wants to cut government borrowing, they're going to have to control their spending... and like you said, if a government wants to control their borrowing then they will have to reduce and take control on their disctretionary spending...so any spending which is optional, and quite unnecessary...

    For example..you can refer to spain... Cut the welfare benefits..it's already too geneerous...so cutting it gives people the incentive to work..this also creates a multiplier and acceletrator effect to help continuously reduce the amount the are spending on welfare benefits... (i'm sure you understand why it leads to that too?)
    But obviously it depends on stuf... like how people resond to a welfare benefits cut etc etc

    also, you could also control how much they borrow by privatising industries...it includes the sale of public industry to the private industry so brings in revenue, and it takes the burden on having to pay for that industry by the governement so they wouldn't have to borrow so much etc etc... again there's a multiplier and accelerator effect involved..
    obviously, public owned stuff is good, but privatising can make industries more efficient too...

    hope that helps
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    (Original post by Rakesh26)
    I'm probably just being stupid here but I have no idea how to answer this... :confused:

    One of the (suggested) questions on the toolkit says:

    Despite the difficulties experienced by the PIIIGS nations in recent years, the European single currency area has been a success. Discuss. (20 marks)
    In addition to those other points made by

    (Original post by FaithChild)
    In addition to 4011seb's points I would probably also talk about the advantages and disadvantages of a single currency and in the conclusion highlight the advantages (as it talks about how it could have been a success) and maybe mention that if the European Single Currency was made up of only the Core, it would probably be regarded as more successful, as the Core alone is closer to an Optimal Currency Area.

    Hope this helps

    (Original post by 4011seb)
    Hi there, that seems a difficult question, it looks perhaps more like a 10 marker in my opinion, however ill probably answer it as follows:

    Talk about the problems(lack of convergance, failure off one size fits all)
    whether these economies would of sufffered even not in the EU( poor supply side)
    Initail short run success vs meltdown vs potential to grow strong again.
    The popularity of currency( 2nd most used according to the stimulus)
    strong economies doing OK such as germany.

    Then maybe conclude that it was good but perhaps grew to big to fast?

    Im not sure what else really, probably need more on why it would be a success.
    like they said earlier...I was thinking maybe it has more to do with the optimal currency area...
    I think you'll have to discuss some conditions like the others said already...
    and see if they've achieved it or not...
    also, i think one of the main benefits was about trade...seeing as the end is really based around globalisation... so stuff about having a a single currency shows price transparency....and maybe being in the area itself creates benefits from free trade? and also the fact that the have a common external trade barrier makes difficulties when the currency appreciates...
    i can't remember and hopefully someone can point this out later!, but something about the exchange rate cannot depreciate to help fix/ease any inflationary problems... oh yeh! i rmemeber now haha...well, because all the countries have the same currency...they all have different structures, inflation rates etc etc etc...so having the same currency creates price transparency and it's really obvious when one countries price rises...so people just buy less...but they're not demanding less of the cureency...cause it's all the same...so the euro can't depreciate to fix the increasing prices for that particular economy.. :/ i hope that made snese! sorry lol

    and you can talk about...
    flexibility of the EU's labour market with a single currency, fiscal transfers and the impact of external shocks...

    maybe could sum it up talking about sovereign states? How it hasn;t really worked as they had hoped cause every in the EU still has seperate everything... could possibly compare to the usa? and say that..their are certain barriers between countries in the EU that isn't in between states... the states of usa are more similar... etc etc etc etc.... maybe more successful?
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    (Original post by ExplosiveHamster)
    can anybody help? :angelblush:
    I feel bad no ones replied yet! ...but erm... to be honest.. i get super confused myself too...you could go in tomorrow at school and ask i guess...?
    If not, i thin i'm going to ask mysel tomorrow lol..so i'll report back? lol
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    (Original post by ExplosiveHamster)
    hey guys, can anyone explain the differences/definition of

    1) the budget account
    2) the current account
    3) the balance of payment
    4) the balance of trade

    i keep getting them mixed up and don't really know what each one is

    (Original post by mqt)
    I feel bad no ones replied yet! ...but erm... to be honest.. i get super confused myself too...you could go in tomorrow at school and ask i guess...?
    If not, i thin i'm going to ask mysel tomorrow lol..so i'll report back? lol
    Hey guys, im no expert but I'll have a go at explaining them

    1) the budget account - this is the difference between tax revenue and government spending, so for example during times of boom, tax revenue will increase (employment will increase, more people paying tax, more people buying things with tax VAT, fuel Duty etc. Also firms will be paying more corporation tax), at the same time, government spending will fall as less needs to be spent on benefits (automatic stabilisers), the government can 'afford' to spend less as investment will increase from firms.....so in times of Boom, the governments budget account 'improves'

    2) the current account - this is part of the Balance of Payments, except the current account only shows inflows and outflows of the economy due to trade. There are many variations of what can happen to the current account, it doesn't really matter whether the economy is booming or in recession as the current account could be improving or worsening despite the economic climate
    For example. In times of boom the current account will only be improving if the growth is export led...i.e. exporting more, importing less. However if the growth is due to increases in domestic demand, then its likely that exports would hardly increase and imports would probably increase. Therefore the current account would worsen....see how the current account can increase or decrease regardless of the economic boom....as it also depends on other factors

    3) the balance of payment - basically a statement of money going in and out of an economy, it consists of the Current Account (inflows and outflows due to trade), Capital Account (inflows and outflows due to investment such as assets, shares, foreign deposits in bank accounts etc)

    4) the balance of trade - the difference between what an economy is importing and exporting...you know the AD equation [C+I+G+(X-M)]...well this is the (X-M) bit...if an economy is exporting more than what its importing, it has a trade surplus, and a trade deficit if its importing more than its exporting......the balance of trade is similar to the current account

    Hope this helps guys!
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    oh god i'm gonna fail this :L
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    (Original post by Indian_Princess)
    oh god i'm gonna fail this :L
    a know that feelin!!!

    hardly get any off it..even with d toolkit =/
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    (Original post by viksta1000)
    Hey guys, im no expert but I'll have a go at explaining them

    1) the budget account - this is the difference between tax revenue and government spending, so for example during times of boom, tax revenue will increase (employment will increase, more people paying tax, more people buying things with tax VAT, fuel Duty etc. Also firms will be paying more corporation tax), at the same time, government spending will fall as less needs to be spent on benefits (automatic stabilisers), the government can 'afford' to spend less as investment will increase from firms.....so in times of Boom, the governments budget account 'improves'

    2) the current account - this is part of the Balance of Payments, except the current account only shows inflows and outflows of the economy due to trade. There are many variations of what can happen to the current account, it doesn't really matter whether the economy is booming or in recession as the current account could be improving or worsening despite the economic climate
    For example. In times of boom the current account will only be improving if the growth is export led...i.e. exporting more, importing less. However if the growth is due to increases in domestic demand, then its likely that exports would hardly increase and imports would probably increase. Therefore the current account would worsen....see how the current account can increase or decrease regardless of the economic boom....as it also depends on other factors

    3) the balance of payment - basically a statement of money going in and out of an economy, it consists of the Current Account (inflows and outflows due to trade), Capital Account (inflows and outflows due to investment such as assets, shares, foreign deposits in bank accounts etc)

    4) the balance of trade - the difference between what an economy is importing and exporting...you know the AD equation [C+I+G+(X-M)]...well this is the (X-M) bit...if an economy is exporting more than what its importing, it has a trade surplus, and a trade deficit if its importing more than its exporting......the balance of trade is similar to the current account

    Hope this helps guys!
    Thankyouuu!
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    not to sound dumb but what does it mean
    'from peak to trough'
    :confused:
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    (Original post by 4011seb)
    Hi there, that seems a difficult question, it looks perhaps more like a 10 marker in my opinion, however ill probably answer it as follows:

    Talk about the problems(lack of convergance, failure off one size fits all)
    whether these economies would of sufffered even not in the EU( poor supply side)
    Initail short run success vs meltdown vs potential to grow strong again.
    The popularity of currency( 2nd most used according to the stimulus)
    strong economies doing OK such as germany.

    Then maybe conclude that it was good but perhaps grew to big to fast?

    Im not sure what else really, probably need more on why it would be a success.

    (Original post by FaithChild)
    In addition to 4011seb's points I would probably also talk about the advantages and disadvantages of a single currency and in the conclusion highlight the advantages (as it talks about how it could have been a success) and maybe mention that if the European Single Currency was made up of only the Core, it would probably be regarded as more successful, as the Core alone is closer to an Optimal Currency Area.

    Hope this helps

    (Original post by mqt)

    like they said earlier...I was thinking maybe it has more to do with the optimal currency area...
    I think you'll have to discuss some conditions like the others said already...
    and see if they've achieved it or not...
    also, i think one of the main benefits was about trade...seeing as the end is really based around globalisation... so stuff about having a a single currency shows price transparency....and maybe being in the area itself creates benefits from free trade? and also the fact that the have a common external trade barrier makes difficulties when the currency appreciates...
    i can't remember and hopefully someone can point this out later!, but something about the exchange rate cannot depreciate to help fix/ease any inflationary problems... oh yeh! i rmemeber now haha...well, because all the countries have the same currency...they all have different structures, inflation rates etc etc etc...so having the same currency creates price transparency and it's really obvious when one countries price rises...so people just buy less...but they're not demanding less of the cureency...cause it's all the same...so the euro can't depreciate to fix the increasing prices for that particular economy.. :/ i hope that made snese! sorry lol

    and you can talk about...
    flexibility of the EU's labour market with a single currency, fiscal transfers and the impact of external shocks...

    maybe could sum it up talking about sovereign states? How it hasn;t really worked as they had hoped cause every in the EU still has seperate everything... could possibly compare to the usa? and say that..their are certain barriers between countries in the EU that isn't in between states... the states of usa are more similar... etc etc etc etc.... maybe more successful?
    :eek: Seems like I have a lot to learn in the next few days
    Thanks for all the responses though - all three were really helpful
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    (Original post by Iram0105)
    not to sound dumb but what does it mean
    'from peak to trough'
    :confused:
    I think it's referring to the economic cycle - highest point being 'peak' and lowest point being 'trough'... if that makes sense?
 
 
 

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