Post Your Economics Question Here

Scroll to see replies

Reply 40

clueless101
I've read what people posted in response to this question, it is all sensible, that is wy I didn't answer. "Analyse" means you need to use evaluation: are buffer stocks successful? Would government want to implement them? What avout the opportunity cost of spending money to create them? Are they easier to use on cocoa than other cultures because it is easier to store? What kind of costs are involved (e.g. storage place, nightwatch).

Reply 41

tanusha-tomsk

Mustard-man

Examine the effect of high oil prices on long-term growth of global trade.

To be honest I'm not an expert on that, but that's what I've come up with:
- Any country's GDP is lower than it would have been if the oil prices are high; they cut into people's real incomes and business's profits >> less investment >> slower economic growth >> may be a recession? There have been 3 global recessions in the past 30 years (don't remember the dates but it's def so), and all have been pre-dated by a sharp rise in oil prices. If a recession happens, the global trade slows down - demand for oil falls down sharply (because there is lower demand for fuel an plastic etc). It could take years for global trade to revive, esp. if US/EU/Japan are affected.
- High oil prices affects inflation rate, esp. if a country is dependend on oil. Higher inflation rate creates inflationary pressures - the need to adjust interest rates/taxation. Goods and Services become less price-competitive >> exports fall & imports rise >> a deficit on Current Account - trade with other countries slows down.
- There must be some ways in which high oil prices help global trade, but I can't think of any unfortunately!
- Evaluation points: depends which countries are affected; Newly Industrialised Economies are now a great part of demand for oil (like China with all the industry). How dependend on oil are the countries that have the large share of oil market (i.e. rely on high-enenrgy industries; some can switch to alternatives). What has cause high oil prices: is it a deliberate restriction of Supply by OPEC [Organisation of Petrolium Exporting Countries], wars in oil-exporting Asia (then the effect is stronger - people know it is long-term and expect oil prices to rise more > which they do).

Mustard-man

I'll give you a rep if you could do mine :biggrin:

That's very kind, but I would do it anyway!! It's just I don't always have time to reply right away, I do 4 A-Levels myself and have my own homework :rolleyes:

Reply 42

tanusha-tomsk

lutionium

Hey, i have to write an essay which is worth 10 marks comparing the monetary and fiscal policy diagrams. Can anyone help me pleeeeease??

Do you mean "comparing fiscal and monetary policies with diagrams"??
If so:

Fiscal policy
- Involves the chancellor of the exchequer who uses changes in taxation and government spending to control inflation and prevent the economy from over-heating.
- If the rate of inflation is expected to rise above the target of 2.0% p.a. the taxes will be increased and/or there will be cuts in government spending. (There will be less disposable income [income-tax+benefits] for consumers to spend >> AD decreases; AND/OR government spending which is one of the components of AD will lower AD). The reverse if the inflation is expected to be lower than planned.
- Takes time because both changes in government spending and taxation have to be announced in the Budget Report once in a year; hense fiscal policy can't be used to respond to an unexpected collapse in markets and inflation (e.g. such as 9/11 or 7/7 bombings).
- Advantages: a "fair" method because increase/decrease in taxation affects the rich most and helps redistribution of incomes.
- Disadvantages: an increase in tax will reduce investment, and government spending on NHS and education [if decreased] is not a positive thing for an economy. Chancellor is as muc a politician as an economist; he might use the taxation to his advantages in "StopGo" politics, negatively affecting the market.

Monetary policy:
- Bank of England's MPC [Monetary Policy Comitee] sets interest rates on a monthly basis to increase/decrease the rate of inflation, as well as controls money supply. In the UK the interest rates have not fallen below 4% in the recent years.
- If interest rates a increased,
a) the value of mortgage repayments is higher >> disposable income is lower >> spending decreases.
b) it is more expensive to spend on credit cards >> discourages pricy purchases e.g. fridge-freezer /washing machine
c) more incentives to save - least important by far.
-In all three, consumer spending falls and AD falls through negative expenditure multiplier (demand falls >> output falls >> unemployment rises >> incomes fall >>demand falls further).
- Advantages: since 1997 thanks to Gordon Brown Bank of England is independend - the policy is for the good of the country not a political party. Interest rates are set monthly - quick reaction to any economic shocks.
- Disadvantages: a change in interest rates affects people at the lower end of income distribution most - making it mote unequal. Discourages investment as well as spending because it is more expensive for businesses to borrow money for Research & Development and Investment in physical and human Capital.

They are both effective, depending on what has caused the higher / lower inflation. I favour the monetary policy because it doesn't slow the development of the economy the way decreased government spending does - at least not directly. It is also quicker and more effective because it is politically not dependend on any party.

Reply 43

Mustard-man

thank you tanusha-tomsk! I'll give you some rep when I can. :yy:

Reply 44

minibailey27

thank you. that kind of helps, but the question just asks for a straightforward comparison of their diagrams.

Reply 45

minibailey27

shall i take it that you are unable to help me with the question then?

Reply 46

tanusha-tomsk

lutionium

shall i take it that you are unable to help me with the question then?

Yeah sorry, I can't even think of a diagram for monetary and fiscal policies :confused:

Unless it is a straight-forward AD/AS diagram... In that case,

•

Monetary:
Consumer spending decrease >> shift in AD to the left first, then a shift in AS to the left via multiplier.

•

Fiscal:
Taxation changes would affect business first (consumers take longer to adjust their spending habbits & also businesses get taxed more e.g. corporation tax) >> shift to the left in AS first and then AD (due to cons. spending and gove. spending decreases) moves to the left.

Just a guess, don't quote me on that though.

Reply 47

s hemmy

need some help with this essay question. it's for 40 marks.
"Examine the significance of the single currency for decisions by multinationals to invest in euro-zone countries."
Edexcel, Unit 6, June 2003
thanks!

Reply 48

Vivacious_Sky

Hey I'm studying Edexcel AS level Economics. I missed a couple of lessons cause the flu's been getting to me. Any brief explainations on RPI, CPI and Measures of Unemployment? It would be really gr8 if you could help me find some decent notes :dontknow:

Reply 49

hotfreezer

Why might the claimant count measure of unemployment be significant to the Monetary Policy Committee?

Reply 50

tanusha-tomsk

s hemmy

The most important advantage of Euro to the investors is economic stability - fluctuations in exchange rate which could have affected the profitability* of a business are not a problem whithin the EuroZone. To justify this we need to assume that the potentials investors will want their businesses to operate in the EuroZone. Whilst most multinational companies will be interested in opening new markets in Europe (particularly in Eastern European countries where the standards of living are rising steadily and demand for a large spector of goods and services is high*), some businesses might be put at disadvantage because it is more difficult to trade with countries from outside the EEU than before (due to poilicies commited to keeping a large part of transactions of finances, goods and services inside the EuroZone).

A strong, effective Central European Bank is commited to and successful in keeping inflation low. It is not tied to any particular government and thus all decisions made by CEB are in the long run interests of EEU* rather than short term governments interests. Because fluctuations in price level are very insignificant, the interest rates have been low and stable in the recent past within the EU. It would be cheaper for a business to borrow money to open a new branch and then to invest in productive and human capital and R&D. However, the extent to which this will affect a businesses decision is limited. A multinational company is very likely to have funds from retained profits not to desperately need to borrow. Also, if it does borrow funds, it is more likely to do so in the country of its origin and not in the investment country.

There are serious disadvantages that businesses need to consider before investing in EU. Whilst the economic policy is effective overall, it is working at the expence of * the 'richer' stronger countries which are being taxed heavily to support weaker members of the EU. Hense the rate of economic growth of individual stronger countries is lower that it would have been expected to be. This would mean a relatively lower demand * for the goods and services the business is willing to provide, and the new businesses might also face a large corporation tax.

In Italics * - scope for evaluation largely based on unit 3. Explain and give examples.

Hope it helps! Sorry it took so long to reply.

Reply 51

Danoz

For exams (GCSE), would it be extremly wise to learn the economies of scale off by heart? they may be simple, but i have not bothered learning them properly.

Reply 52

Champagne Breakfast

You're kidding. I'm not even learning those for AS.

Reply 53

nah

dont know if anybody'll know this, but has anybody done the AQA ECN2 January 2006 AS exam? if so, do u know the questions? I need them for revision!!!! :tsr2:

THnx

Reply 54

DredgeReformist

Danoz

For exams (GCSE), would it be extremly wise to learn the economies of scale off by heart? they may be simple, but i have not bothered learning them properly.

When I took my GCSEs (3 years ago) I spent the entire paper rolling off the various economies of scale and got an A*. I didn't know much else!

Reply 55

Nuheen

The Ace is Back

You're kidding. I'm not even learning those for AS.

You are kidding, right? Economies of scale is in the first unit I think.

Reply 56

Champagne Breakfast

Nuheen

You are kidding, right? Economies of scale is in the first unit I think.

Yeah it's in there but you don't need to rote learn all economies and diseconomies of scale off by heart. Either the examples will be in the question, or you will need to provide one or two.

Reply 57

Nuheen

Well I understand stuff about economics, I never memorise them. But i read through the chapters thoroughly.

Reply 58

Chilly

Can anyone help me with these questions-

Discuss whether developing economies should adopt the same path towards development followed by developed economies (15)

Discuss the extent to which the economic problems of the poorer regions in developed countries are similar to those of developing economies. (15)

Discuss whether the links between developing and developed economies have always promoted development. (15)

Thank you for any help