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Reply 520
Avatar for ExRx123
ExRx123
17
alex_hk90
I was under the impression that it is exactly the same as a fixed rate (within a certain band). So when the exchange rate for the other currency falls through the floor, the central bank of that country will buy up some of the currency (using reserves of dollars or gold) to shift demand to the right and bring the price back up above the floor. And when the exchange rate for the other currency rises above the ceiling, the central bank will sell the other currency (buying dollars and adding to its reserves).

As for the effect it has, I'll need to think about it a bit.


Right ok I see, so as the dollar is falling, these oil countries are having to buy more of their own currency using the dollar reserves they have? From the articles I've read it reduces their oil revenue, is this perhaps because some of the revenue they get from oil (which is in dollars right?) is now having to be used to buy back their currency?
El Mariachi
Right ok I see, so as the dollar is falling, these oil countries are having to buy more of their own currency using the dollar reserves they have? From the articles I've read it reduces their oil revenue, is this perhaps because some of the revenue they get from oil (which is in dollars right?) is now having to be used to buy back their currency?

I would have thought that the dollar falling would mean that the other currencies would rise. They would have to sell their currency (shifting supply out) to keep the exchange rate under the ceiling. This would mean that their dollar reserves would be rising. I'm still not sure what effect it has on oil revenues (which would be received in dollars).

Hopefully someone who's a bit more comfortable with this can explain it better.
Reply 522
Avatar for 02mik_e
02mik_e
14
What diagrams would i draw for this question:

Evaluate the economic case for and against the UK government further increasing tax on tobacco in order to reduce smoking.

Thanks
Reply 523
Avatar for ExRx123
ExRx123
17
alex_hk90
I would have thought that the dollar falling would mean that the other currencies would rise. They would have to sell their currency (shifting supply out) to keep the exchange rate under the ceiling. This would mean that their dollar reserves would be rising. I'm still not sure what effect it has on oil revenues (which would be received in dollars).

Hopefully someone who's a bit more comfortable with this can explain it better.


Yeah, thanks for trying though :smile:
El Mariachi
Right ok I see, so as the dollar is falling, these oil countries are having to buy more of their own currency using the dollar reserves they have? From the articles I've read it reduces their oil revenue, is this perhaps because some of the revenue they get from oil (which is in dollars right?) is now having to be used to buy back their currency?

No, because buying more domestic currency would cause it to rise against the dollar. They want the opposite. So alex is right in saying that when the domestic currency appreciates against the dollar, the govt/central bank will buy up dollars and sell domestic currency to maintain the peg.

As for oil revenues, its in dollars. Dollars are worth less today = revenues are worth less. In the end, they have to convert these dollar revenues to domestic currency to spend them right?!
CorpusNinja
As for oil revenues, its in dollars. Dollars are worth less today = revenues are worth less. In the end, they have to convert these dollar revenues to domestic currency to spend them right?!

That's the conclusion I just came to.
It's the direction that the exchange rate of the dollar is going in that matters.
If you sold 1 gallon of oil yesterday for $100 (which was worth £50), but today $100 is only worth £45, then the value of your oil revenue has fallen.
02mik_e
What diagrams would i draw for this question:

Evaluate the economic case for and against the UK government further increasing tax on tobacco in order to reduce smoking.

Thanks

Well first of all tobacco is a demerit good so you want a fairly inelastic demand. an increase in tax will increase the cost of production for firms so you should shift the supply curve to the left from the original market equilibrium. this should lead to a large increase in price of tobacco and a small decrease in demand.
Reply 527
Avatar for ExRx123
ExRx123
17
CorpusNinja
No, because buying more domestic currency would cause it to rise against the dollar. They want the opposite. So alex is right in saying that when the domestic currency appreciates against the dollar, the govt/central bank will buy up dollars and sell domestic currency to maintain the peg.

As for oil revenues, its in dollars. Dollars are worth less today = revenues are worth less. In the end, they have to convert these dollar revenues to domestic currency to spend them right?!


Yeah, obviously :s-smilie: Lol, thanks.
Reply 528
Avatar for EsStupido
EsStupido
"Using supply and demand diagrams to illustrate your answer, and making clear your assumptions, examine the effects of the expansion of the cultivation of biofuels on the price of food. Give a full explanation of how you arrive at the answer you give."

Hi, I'm in my first year of University and this is my first essay question I've ever done for my course. I was wondering anyone could give me any advice on what should be included? I've written the essay itself, but I'm not overly sure if I've included the right material.

It's 1000 words.
Reply 529
Avatar for Apagg
Apagg
13
Wait, this is your first essay? You're near the end of term surely? Get a real workload!
Reply 530
Avatar for EsStupido
EsStupido
I'm a first year. :cool:

The essay is only 30% anyway...plus I'm doing a Dual Honours degree.
Reply 531
Avatar for Apagg
Apagg
13
What uni are you at? I think I had 8 economics essays in the first term of my first year, not including History and Politics essays and maths problems.
Reply 532
Avatar for EsStupido
EsStupido
Keele...

I have other essays and tests coming up this week, but I haven't had anywhere near 8 essays!
Reply 533
Avatar for Apagg
Apagg
13
Knew it, everywhere else is a doss :p:
I'm having a little trouble getting the technique right on the last questions for the OCR Development paper (Unit 2886), especially part a).

Explain why some countries, such as Zambia, have a saving ratio of about 5% whilst the ratio in other countries, such as South Korea, is over 30%. (10)

The ones I have the most trouble with are the ones where you have to explain the way that developing countries are so different when it comes to different aspects of development (i.e. economic development, HDI, HPI).

Do you just list a load of ways they are different/have a different savings ratio and then elaborate on how and why?
Reply 535
Avatar for Vesta
Vesta
18
An economy is operating on it's PPF. If the output of capital goods is increased then the output of consumer goods will

A) Increase in the short run, but decrease in the short run.
B) Decrease in the short run, increase in the long run
C) Increase in the short run and increase in the long run
D) Decrease in the short run and decrease in the long run

I think it's B, as the country will have to spend a lot of it's resources on investing and capital, but in the long run this means it can produce more. Can anyone confirm? Thanks :smile:
Reply 536
Avatar for Vesta
Vesta
18
One more please :p: :puppyeyes:

One of the main functions of the price mechanism in a free market economy is to:

A) provide free goods
B) ration scarce goods
C) ensure that incomes are evenly distributed
D) keep prices stable

pleaaaaaaaaaaaaase :smile:

I think it's B but I dont know why and how I got that :s-smilie:
Vesta
An economy is operating on it's PPF. If the output of capital goods is increased then the output of consumer goods will

A) Increase in the short run, but decrease in the short run.
B) Decrease in the short run, increase in the long run
C) Increase in the short run and increase in the long run
D) Decrease in the short run and decrease in the long run

I think it's B, as the country will have to spend a lot of it's resources on investing and capital, but in the long run this means it can produce more. Can anyone confirm? Thanks :smile:

I also think it's B.

Vesta
One more please :p: :puppyeyes:

One of the main functions of the price mechanism in a free market economy is to:

A) provide free goods
B) ration scarce goods
C) ensure that incomes are evenly distributed
D) keep prices stable

pleaaaaaaaaaaaaase :smile:

I think it's B but I dont know why and how I got that :s-smilie:

Again, I also think it's B.
The price mechanism rations scarce goods to reflect conditions in supply and demand.
Reply 538
Avatar for Vesta
Vesta
18
alex_hk90
I also think it's B.


Again, I also think it's B.
The price mechanism rations scarce goods to reflect conditions in supply and demand.


How do I explain that to get 4 marks?

Thanks for the help , I'll try to remember to give you rep tomorrow :redface:
Reply 539
Avatar for Vesta
Vesta
18


This diagram shows the effect of an increase in demand for cherry tomatoes. this will cause:

A) produxcer surplus and consumer surplus to increase

B) consumer surplus and producer surplus to decrease

C) producer surplus to decrease and consumer surplus to remain unchanged

D) no change in either consumer or producer surplus.

i really cant work this one out, surely the producer surplus increases and consumer decreases?

please help me thank you so much :redface:

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