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    (Original post by will2348)
    You can definitely use tradeable permits, ad/as, negative externalities with a tax applied and subsidy diagram in there somewhere
    basically AS knowledge, nothin new!
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    (Original post by will2348)
    What's that diagram? Never even head of it? What page?

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    (Original post by ChoccyWoccy)
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    Thanks. I remember that now actually. Could anyone explain to me the Accelerator effect in more simple terms than the text book does? And how it interacts with multiplier? And where you might mention this in an essay?

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    Whats the difference between economics, real and monetary convergence?

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    (Original post by will2348)
    Thanks. I remember that now actually. Could anyone explain to me the Accelerator effect in more simple terms than the text book does? And how it interacts with multiplier? And where you might mention this in an essay?

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    The accelerator effect basically says the rate of increase in national income is linked to the level of investment. A faster rate of growth in national income means an increased level of investment. This is because higher income means people spend more, stimulating businesses to expand production.
    The multiplier effect basically says that an initial injection causing an increase in AD results in a greater final change in AD as there are knock on effects.

    A multiplier effect causes people to have increased incomes. This causes an accelerator effect because higher national income increases investment. Investment is a component of AD and causes increased AD, resulting in a multiplier effect and the cycle continues.
    Eventually, as growth reaches its peak, the accelerator occurs in reverse as the economy will grow slower, and investment then falls. This has a negative multiplier effect.

    You can mention the accelerator effect when talking about the consequences of fast economic growth
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    (Original post by Matthewgj)
    Great list btw

    Have you made some model answers by any chance??

    Im not trying to "steal" your hard work, but I have been working through them and I want to see if I was any close to what you got.

    FYI, if anyone on this thread wants an .mp3 of a lesson I went to covering basically everything the exam board can ask on the last question, just holla!
    It would be so great if I could have this!!
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    Could anyone help me with an essay plan for this question:
    "Discuss the view that sustainable development in Estonia requires slower economic growth"

    Thanks in advance
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    Is capital flight mentioned anywhere in the OCR book?
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    (Original post by KaranbirBandesha)
    Is capital flight mentioned anywhere in the OCR book?
    not in mine but i think it basically means money, such as debt flows or FDI, leaving a country.
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    (Original post by KaranbirBandesha)
    Is capital flight mentioned anywhere in the OCR book?
    I don't have a definition but I've put this together..

    Capital flight refers to a situation where financial securities, assets or money rapidly flow out of a country due to an event of economic consequence.

    Two reasons for capital flight:
    - Financial Crisis/Loss of Confidence/Slow Down
    - High Rates of Inflation

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    (Original post by Infamous12)
    not in mine but i think it basically means money, such as debt flows or FDI, leaving a country.
    (Original post by will2348)
    I don't have a definition but I've put this together..

    Capital flight refers to a situation where financial securities, assets or money rapidly flow out of a country due to an event of economic consequence.

    Two reasons for capital flight:
    - Financial Crisis/Loss of Confidence/Slow Down
    - High Rates of Inflation

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    Thankyouuu!
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    I have made some bullet points for this question but was wondering if anyone could come out with a few points in depth to answer this question, found it a little struggle to answer it fully...

    With reference to data in Figures 3.1 and 3.2, comment on the possible trade-offs between economic growth and inflation in the Estonian economy?

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    Could someone analyse fig 3.1 and 3.2 and explain the reasons for why it was so volatile and how the economy quickly recovered, please
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    If its not too much trouble could i have the mp3 also :-)
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    Hope everyone`s revision is going well!

    Just wondering if anyone has any advice on how to structure the 10 mark questions in this paper??
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    Analyse why is it necessary for countries to be converged when joining the Eurozone? [6]

    Essay plan for this question please? thanks!
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    Explain how austerity measures restore wage and price competitiveness?


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    Feedback on this essay?

    1. Comment on the possible effects of maintaining a fixed exchange rate during economic recession
    · A fixed exchange rate, like that of the ERM II, occurs when a country tries to keep the value of its currency at a certain level against another currency.
    · A fixed exchange rate can benefit an economy suffering from a recession in a few ways:
    1. Avoids currency fluctuations and promotes stability: even when a countries growth is low, the lack of exchange rate fluctuations can act as an incentive to invest. For example, even when the Estonia government was in recession in 2008, its open economy and low unit labour costs helped to attract FDI to bring it out of recession.
    2. Furthermore, Estonia’s relatively low inflation may be a result of its choice to operate a fixed exchange rate within the ERM II, as governments who allow their exchange rates to devalue may cause inflationary pressures as exports become more competitive and AD increase (diagram).
    · However, some countries, such as Latvia, have blamed a fixed exchange rate on their economic struggles. This is because; when an economy is in recession, it is unable to devalue their exchange rate in order to increase its international competitiveness, thus making it more difficult to lift themselves out of recession.
    · Overall, the effects depend on the rate at which the exchange rate is fixed. In a time of recession, a low Exchange rate would be the most beneficial, but when countries were beginning to join the ERM II, due to the convergence criteria most economies were in economic growth, so they are unlikely to have opted for a high exchange rate. A fixed exchange rate is more likely to be beneficial is a countries currency is undervalued.
    · It may also be argued that the effects of a fixed exchange rate in terms of attracting FDI is less to do the actual exchange rate, than factors such as a favourable tax environment, unit labour costs, and expected future growth, therefore, a fixed exchange rate may not bring as many costs during a recession as first expected.
    · It will benefit some industries (I.e: those who tend to rely on imports, as prices are generally stable thus allowing planning) more than others (i.e: export heavy firms).




    Thanks
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    (Original post by physicso)
    Feedback on this essay?

    1. Comment on the possible effects of maintaining a fixed exchange rate during economic recession
    · A fixed exchange rate, like that of the ERM II, occurs when a country tries to keep the value of its currency at a certain level against another currency.
    · A fixed exchange rate can benefit an economy suffering from a recession in a few ways:
    1. Avoids currency fluctuations and promotes stability: even when a countries growth is low, the lack of exchange rate fluctuations can act as an incentive to invest. For example, even when the Estonia government was in recession in 2008, its open economy and low unit labour costs helped to attract FDI to bring it out of recession.
    2. Furthermore, Estonia’s relatively low inflation may be a result of its choice to operate a fixed exchange rate within the ERM II, as governments who allow their exchange rates to devalue may cause inflationary pressures as exports become more competitive and AD increase (diagram).
    · However, some countries, such as Latvia, have blamed a fixed exchange rate on their economic struggles. This is because; when an economy is in recession, it is unable to devalue their exchange rate in order to increase its international competitiveness, thus making it more difficult to lift themselves out of recession.
    · Overall, the effects depend on the rate at which the exchange rate is fixed. In a time of recession, a low Exchange rate would be the most beneficial, but when countries were beginning to join the ERM II, due to the convergence criteria most economies were in economic growth, so they are unlikely to have opted for a high exchange rate. A fixed exchange rate is more likely to be beneficial is a countries currency is undervalued.
    · It may also be argued that the effects of a fixed exchange rate in terms of attracting FDI is less to do the actual exchange rate, than factors such as a favourable tax environment, unit labour costs, and expected future growth, therefore, a fixed exchange rate may not bring as many costs during a recession as first expected.
    · It will benefit some industries (I.e: those who tend to rely on imports, as prices are generally stable thus allowing planning) more than others (i.e: export heavy firms).




    Thanks
    You should probably mention that being part of ERM II meant Latvia could not competitively devalue it's currency when it came under speculative attack. Im pretty sure your first point is the opposite of what you said. Having a fixed exchange rate during recession would mean that the currency would be valued above what it is worth and in order to support this the country would need to prop up their currency with foreign currency reserves and gold. You could mention here about how Latvia needed loans totalling 7.5bn from the IMF and that the opportunity cost of servicing this debt is a further cost of their fixed exchange rate.

    Anyway, thats a tough question, hopefully something like fixed vs floating would come up instead. Hope this helps.
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    + a negative is that is is very expensive to maintain the ER in recession (assuming demand is bellow that of the ER) this is costly in a recession when government revenues would be best used to pumped into the economy, not spent on maintaining the ER...

    +also the inability to alter your IR so that it helps increase AD is a major loss...

    However, like you said, that stability which it offers a country and foreign investors may be beneficial to a country....
 
 
 
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