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    Yes, I understand the previous question. I've been doing past exam questions for unit 6 and for the answer, one was fiscal drag.

    EDIT: Thanks Apagg, that makes sense. The question was about the future consequence of fiscal deficit and this would match as the government would need to rise tax revenue.
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    What happened between 1999-2001 regarding the pension fund? Forced to buy government bonds? What does that mean?
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    (Original post by iRealGirl)
    What happened between 1999-2001 regarding the pension fund? Forced to buy government bonds? What does that mean?
    a big one this, Brown started taxing the pension funds I believe,

    oh and the work/leisure thing depends on the indifference curve, personally I would choose leisure, but most would work more.
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    Did Brown tax the pension money that they received? How did he do that?
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    no, i think the funds themselves directly, i don't know the details but it was billions of pounds, but the stockmarket went up so people still got there pensions probably.
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    A couple of MCQ I am confused with.

    A firm earns supernormal profit when its profit is above that
    a) earned by competing firms
    b) needed to cover its fixedcosts
    c) needed to keep the firm in production in the short run
    d) required to keep its resources in their present use

    A firm produces at AVC = MC. What will happen initially to AVC and ATC as output rises?

    AVC ATC
    dec dec
    dec inc
    inc dec
    inc inc

    What causes the rise in the rate of interest from r1 to r2 (diagram showing 2 LPCs and fixed money supply. Movement to the right of the first LPC, rising interest rate)

    a) an increase in national income
    b) an increase in the money supply
    c) a reduction in investment expenditure
    d) a reduction in the loans made by the private sector

    Thanks
    a brief explanation would be handy, because i got these questions wrong and know the right answers, just can't work out why. Maybe if you have different answers, my friend was shouting out the wrong answers :p:
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    d for the first one. Dunno, but the opportunity cost concept comes into play.
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    (Original post by well_tempered)
    d for the first one
    Why? I thought C, because I thought that is the level of normal profit so anything above that is abnormal/supernormal profit?
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    PS Reviewer
    (Original post by Shrayans)
    A firm earns supernormal profit when its profit is above that
    a) earned by competing firms
    b) needed to cover its fixedcosts
    c) needed to keep the firm in production in the short run
    d) required to keep its resources in their present use
    d) A definition of normal profit is that which is required to keep the firm's resources in their present use.
    Supernormal or abnormal profit is anything over and above that.
    It's similar to transfer earnings and economic rent for an individual.
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    Ah.. I didn't know that definition of normal profit. Thanks.
    Yea, i like that analogy, makes it easier to understand.
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    The other two anyone?
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    (Original post by Shrayans)
    Why? I thought C, because I thought that is the level of normal profit so anything above that is abnormal/supernormal profit?
    No, normal profit is for the Long Run.

    Might be a) for the second one, higher natinoal income means higher demand for money, so LPC shifts right.
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    (Original post by well_tempered)
    No, normal profit is for the Long Run.

    Might be a) for the second one, higher natinoal income means higher demand for money, so LPC shifts right.
    Ahh... silly me, normal profit recquired to stay in the industry in the long run! :mad:

    Yes, it is a). I hate liquidity preference.... annoying topic.
    As higher income, shouldn't you demand less money? Because you need less of a proportion of your income?
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    You get paid Friday, and gradually use the money to buy things, so there is an average money holding. If you start the week with a bigger wage, the average money holding/demand for money, is higher.
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    (Original post by well_tempered)
    You get paid Friday, and gradually use the money to buy things, so there is an average money holding. If you start the week with a bigger wage, the average money holding/demand for money, is higher.
    Yes, I understand now Thanks.

    Thats the third question, can you help on the second one?
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    try it yourself, might have a look later
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    I have. I did a paper, these were the ones I got wrong. lol
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    (Original post by Shrayans)
    I have. I did a paper, these were the ones I got wrong. lol
    Sorry, it seemed hard that's all. But it's not,lol.

    Just think the MC must cut the AVC at the minimum point on the AVC curve. It's straightforward now.
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    Yea, thats why I put the answer as increasing and increasing.
    The answer scheme says increasing and decreasing. I don't understand how ATC can fall?? Doesn't it rise after the point where MC cuts AVC?
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    AVC must rise as you started at the minimum. ATC also rises, because it has reached a mimum already at a lower output. But I don't know why this happens. I'll let some else answer that.

    thanks for the rep.
 
 
 
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