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F581/ F582 Economics June 2013 Watch

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    How would fiscal policy reduce unemployment? I know that the expansionary fiscal policy involves increasing AD, therefore govt spending would increase and they would cut taxes. So obviously the lower taxes will increase consumer spending as they have more disposable income. Is is because of the higher AD?
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    (Original post by cheese94)
    How would fiscal policy reduce unemployment? I know that the expansionary fiscal policy involves increasing AD, therefore govt spending would increase and they would cut taxes. So obviously the lower taxes will increase consumer spending as they have more disposable income. Is is because of the higher AD?
    :yep:

    It would cause a multiplier effect, since it is assumed that the lower taxation will result in an increased consumer expenditure - and this may also lead to the accelerator effect, whereby investment in capital goods may increase, causing investment to increase also. Therefore, assuming ceteris paribus, C, I and G would increase, with net exports staying constant, and thus AD would increase.

    In this scenario, I would draw a diagram showing AD increasing from where there's considerable spare capacity to where there's fewer idle resources, indicating a fall in unemployment, as firms will be producing more output, of which they will need more workers. It's basically one thing leading onto another haha.
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    (Original post by CTArsenal)
    :yep:

    It would cause a multiplier effect, since it is assumed that the lower taxation will result in an increased consumer expenditure - and this may also lead to the accelerator effect, whereby investment in capital goods may increase, causing investment to increase also. Therefore, assuming ceteris paribus, C, I and G would increase, with net exports staying constant, and thus AD would increase.

    In this scenario, I would draw a diagram showing AD increasing from where there's considerable spare capacity to where there's fewer idle resources, indicating a fall in unemployment, as firms will be producing more output, of which they will need more workers. It's basically one thing leading onto another haha.
    Thanks! that helps a lot.. just worried about getting 18 marks worth of stuff down in the essay questions... this threads making me panik!
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    hey guys..just went through this thread and it has been really helpful! I was wondering it anyone could help me answer the following question:

    'Comment on whether a fall in an economy's unemployment rate will increase economic growth'

    Cheers x
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    (Original post by fathimadeen)
    hey guys..just went through this thread and it has been really helpful! I was wondering it anyone could help me answer the following question:

    'Comment on whether a fall in an economy's unemployment rate will increase economic growth'

    Cheers x
    That question's been answered a couple posts back, check posts #133 to #140
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    (Original post by CTArsenal)
    That question's been answered a couple posts back, check posts #133 to #140
    Sorry I must have missed it. Thanks for pointing it out
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    Guys could someone help me with the structure for an essay like this?
    Discuss the effectiveness of reducing government spending in order to lower demand pull inflation?
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    So everyone thinks the 18 marker will be on employment. Please could someone me improve my answer to this question

    "discuss SSP in reducing unemployment" (i strongly believe this will be the question)

    1)define SSP +unemployment
    2)diagram showing right shift in AS and therefore unemployment
    3)YES
    -increase education increases productive capacity of economy as more skills increase productivity therefore shift AS right
    -privatization increases effeciceny therefore increases ammount that can be produced and therefore increase AS
    -increase assitance to new firms. New firms create jobs, therefore more new firms means more jobs.
    -reducing trade union power reduces wages back to equilibrium wage rate therefore more employed..

    4)However-depends on;

    -type of unemployment; if unemployment demand deficient it wont work
    -Also there is a time lag
    -amount of SSP used (only small increase in SSP wont have a big effect)
    -may not work.


    Please could someone tell me if this is allong the right lines. Thanks!
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    (Original post by kris3332)
    Guys could someone help me with the structure for an essay like this?
    Discuss the effectiveness of reducing government spending in order to lower demand pull inflation?
    Structure's usually the same for each essay for me, I follow this:

    Introduction: List key definitions, in this case define what demand pull inflation is and talk about Government Expenditure being a component of AD, and then talk about what your essay will be about - and also say this is a Fiscal Policy.

    Paragraph 1: Analysis, show a diagram with demand-pull inflation, indicating a shift to the left in AD due to Government Expenditure falling, talk about the price level falling as well as the real GDP, and talk briefly about it possibly being a problem since spare capacity will increase, meaning firms may start cutting jobs as they don't need as many workers to do the same amount of work.

    Paragraph 2: Limitations, talk about the extent of the fall in AD, other factors that may offset the fall in Government Expenditure, inaccurate economic data - as the Government take action on the basis of economic data, etc.

    Paragraph 3: Alternative, talk about how Monetary Policy / Supply-side Policy may help.

    Paragraph 4: Limitations of the Monetary Policy / Supply-side Policy.

    Paragraph 5: Evaluation of both policies together, compare limitations and how each could respectively help to lower inflationary pressure.

    Paragraph 6: Conclude if it's an effective policy or not, in detail.
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    (Original post by fathimadeen)
    hey guys..just went through this thread and it has been really helpful! I was wondering it anyone could help me answer the following question:

    'Comment on whether a fall in an economy's unemployment rate will increase economic growth'

    Cheers x
    Analyses
    1)-decrease unemployment; businesses have more workers; increase the production of goods; output of the business increase; increase the productive capacity of the economy; thus long run economic growth

    2) decrease unemployment; increase in real disposable income; increase ability to purchase more products; increase consumer expenditure; component of AD = c+I+G+(X-M) ; increase AD; increase in short run economic growth

    Evaluation
    - depends on how large the decrease in unemployment is
    - depends if the economy is operating at full capacity or not
    - multiplier effect
    -depends on consumer confidence


    i hope this helps and provides more of an understanding
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    What does Fiscal, Monetary and Supply side depend on?

    So far I have: they all take a long time to take effect.
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    (Original post by >Username<)
    What does Fiscal, Monetary and Supply side depend on?

    So far I have: they all take a long time to take effect.
    Are you talking about their effectiveness?
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    (Original post by heirloom)
    Are you talking about their effectiveness?
    Yeah. Evaluative points to write in an essay or maybe even comment questions. So, it depends on...
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    'Discuss whether balance of payments deficit on the current account is always harmful'
    How would you structure this essay? What points would you include?

    Thanks in advance.
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    (Original post by CTArsenal)
    Structure's usually the same for each essay for me, I follow this:

    Introduction: List key definitions, in this case define what demand pull inflation is and talk about Government Expenditure being a component of AD, and then talk about what your essay will be about - and also say this is a Fiscal Policy.

    Paragraph 1: Analysis, show a diagram with demand-pull inflation, indicating a shift to the left in AD due to Government Expenditure falling, talk about the price level falling as well as the real GDP, and talk briefly about it possibly being a problem since spare capacity will increase, meaning firms may start cutting jobs as they don't need as many workers to do the same amount of work.

    Paragraph 2: Limitations, talk about the extent of the fall in AD, other factors that may offset the fall in Government Expenditure, inaccurate economic data - as the Government take action on the basis of economic data, etc.

    Paragraph 3: Alternative, talk about how Monetary Policy / Supply-side Policy may help.

    Paragraph 4: Limitations of the Monetary Policy / Supply-side Policy.

    Paragraph 5: Evaluation of both policies together, compare limitations and how each could respectively help to lower inflationary pressure.

    Paragraph 6: Conclude if it's an effective policy or not, in detail.

    yep - but i don't think you have to talk about any alternatives in detail , you can get the 18 marks just by saying why it will work and why it might not work

    i could be wrong though haha thats just what my teacher told me
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    (Original post by >Username<)
    What does Fiscal, Monetary and Supply side depend on?

    So far I have: they all take a long time to take effect.
    heres some that i can think of from the top of my head:
    - Time Lag
    - Once implemented they have to be completed/ carried on
    - relies on AD being there, e.g no effect is economy is functioning where there isn't any inflation
    - how effective they are could depend on confidence of businesses or consumers
    - How long they are implemented for
    - Opportunity cost e.g. increase gov. spending on eduction, less money spent on the health sector
    - can be expensive to implement and maintain
    - a police may cause a conflict among other economic objectives

    hope that helps
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    if AS was to decrease, the effect will depend on the initial level of economic activity. if there is initially considerable spare capacity, the effect will be less harmful than if the economy is operating at full capacity. <---- could someone explain that to me pleeease?? it doesn't seem to make sense on the graph to me, Thank you to whoever responds
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    for what Fiscal,monetary and supply-side depend on :

    - time lags
    - level of economic activity/position of economy
    - consumer confidence/expectations
    - conflicting policy objectives
    - Opportunity Cost
    - size of policy ( for example size of the cut in taxes )
    - what original level was ( if the income tax rates were 0.002% then cutting them further wouldn't help )
    - planned length of implementation

    hope that helps !
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    (Original post by wolalala)
    if AS was to decrease, the effect will depend on the initial level of economic activity. if there is initially considerable spare capacity, the effect will be less harmful than if the economy is operating at full capacity. <---- could someone explain that to me pleeease?? it doesn't seem to make sense on the graph to me, Thank you to whoever responds
    have you tried drawing an LRAS Diagram ?
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    does anyone know what are all the calculations needed for the f582 exam?
 
 
 
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