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    (Original post by The Sherminator)
    One thing could be falling interest rates, they cause money to flow out of a country to seek better returns elsewhere, hence exchange rates will fall (supply and demand of a currency).

    If exchange rates fall, exported goods become relatively cheaper, hence AD will rise, because exports are a component of AD.
    thnx for the reply repping later...

    id just like to know if there is an outflow of money why would the currency fall? and will it affect AS too?

    thnx
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    Well an outflow of money would increase the supply of currency on the foreign currency market hence the "price" of currency, which is the exchange rate will fall.

    Imports will become more expensive so raw materials which are imported are expensive. As costs for firm rise, AS will be reduced.
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    (Original post by The Sherminator)
    Well an outflow of money would increase the supply of currency on the foreign currency market hence the "price" of currency, which is the exchange rate will fall.

    Imports will become more expensive so raw materials which are imported are expensive. As costs for firm rise, AS will be reduced.
    omg!!! your soooo helpful!!! thnx

    can an AS/AD diagram be used to represent this? (im doing AS level btw ) i know that the AD curve will shift to the left, but what would happen to the AS curve? because there will be a greater supply f the currency (so wouldnt the curve move to the right?) but also at the same time, firms costs will increase ( so it would shift to the left) and what would go on the axis?

    thnx
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    (Original post by tokyorose888)
    omg!!! your soooo helpful!!! thnx

    can an AS/AD diagram be used to represent this? (im doing AS level btw ) i know that the AD curve will shift to the left, but what would happen to the AS curve? because there will be a greater supply f the currency (so wouldnt the curve move to the right?) but also at the same time, firms costs will increase ( so it would shift to the left) and what would go on the axis?

    thnx
    Yes, but for exchange rates its the supply and demand of the currency. As the supply of a currency increases it depreciates as on the y-axis you have the exchange rate and the x-axis the quantity.

    There are 2 diagrams here, one is the currency market (demand and supply of currency) and the second is the AD/AS diagram.
    Which AS are you using, the Keynesian or Monetarist?
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    the keynesian one i think, the one that slopes upwards and then becomes vertical in the end lol

    would the AS/AD diagram have real GDP on X axis and Price on Y axis?

    sorry for asking so many questions but this topic is confusing lol

    thnx
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    Yep it would.
    No probs
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    (Original post by The Sherminator)
    Yep it would.
    No probs
    would the whole AS curve shift outwards? or would the horizontal bit stay the same, but the vertical part move outward if you know what i mean
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    Horizontal stays the same. Its the bit where it starts curving which moves outward.
    You can even draw the points of NAIRU on it and its useful when discussing unemployment and the Keynesian AS.
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    (Original post by The Sherminator)
    Horizontal stays the same. Its the bit where it starts curving which moves outward.
    You can even draw the points of NAIRU on it and its useful when discussing unemployment and the Keynesian AS.
    sorry to ask agina but does the horizontal part of the AS curve ever move in any circumstances? my teacher says its ok to shift the whole AS curve in the exam in your not sure ( i do edexcel AS)
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    It shifts outward, sort of, I guess, in that it becomes longer, because the full employment level is now higher than before, and so you'll have a constant price level for higher levels of output than before the change in productivity (or whatever has affected your supply curve)
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    Question =

    List 4 differences between the RPI and the RPIX
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    RPIX is RPI excluding mortgages thats all i know lol
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    lol yeah same here..

    I have 2

    1. RPI includes mortgage repayments, RPIX excludes mortgage repayments
    2. RPI headline rate of inflation, RPIX underlying rate of inflation ( more reliable)
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    I don't remembering ever having done this....
    We only used RPI here to measure inflation, a difference in syllabi?
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    (Original post by The Sherminator)
    I don't remembering ever having done this....
    We only used RPI here to measure inflation, a difference in syllabi?
    Probably, we had RPI, RPIX, RPIY and CPI.
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    (Original post by alex_hk90)
    Probably, we had RPI, RPIX, RPIY and CPI.
    Are some of those UK specific measures?
    RPI and CPI are the only measures I have heard of.
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    PS Reviewer
    (Original post by The Sherminator)
    Are some of those UK specific measures?
    RPI and CPI are the only measures I have heard of.
    I think RPIX and RPIY are UK specific, yes.
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    I have 2 questions:

    1.) When it has something like "Index of dollar oil prices: Jan 2002 = 100", what does that mean? What is meant by the base year. This is a 2 marks question, how would I answer it perfectly to get my 2 marks.

    2.) There is a question on oil prices which say what would be the effect on AS if oil prices rise. I say its shifts to the left as oil price is a production cost but I can't seem to justify why it would shift to the left. I wrote 'oil is a production cost of an increase in oil prices is likely to decrease AS as ... (What could I write?)'

    Thanks in advance.
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    1) Jan 2002 is the base year. A price index normalises prices, setting the price level in one year equal to 100 (the base year, 2002 here) and then expressing all other years' prices relative to that. This is done by dividing through by the price level in the base year and multiplying by 100.

    2) Because production costs have increased, then for any given price level, a lower quantity will be supplied. The AS curve depicts the relationship between prices and output supplied, so must shift inward to reflect this.
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    can anyone tell me the difference between consumer surplus and consumer welfare???Is there any difference????
 
 
 
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