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Edexcel Economics Unit 4 Global Economy Discussion Thread (10.June.2014)

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June 2012, 5e "discuss the view that governments of countries with large budget deficits should take measures to reduce them as quickly as possible" for the life of me I can't understand the mark scheme. Anyone?

Hi,

When I did this question, I got it wrong because I focused too much on the quickly as possible which changed the emphasis of the question. I just wish they did not put redundant words which confuses candidates. The reply the previous person has put is very good.

Reply 501

Qmakz

Just a question guys how do you get 100 UMS ? Is it for example if the A* is 80% and the A is 73, does that mean that 100 UMS is 87%? Or does the remaining 10 UMS get distributed through the remaining 20 marks

Reply 502

Dilzo999

Original post by aminkaram

I haven't done it. But I was writing a plan for it. Factors were:
1. Inflation
2. Interest rates
3. Competitiveness

Add that because the US is in a constant trade deficit (One of the largest in the world) and it has a floating exchange rate that will cause the current to depreciate. Evaluation could be magnitude of trades isn't that big.

Original post by Qmakz

It's out of 100 marks and 120 UMS as it's worth 60% of A2 :smile:

. Most of the time 85-90+ marks will get you 120UMS.

(edited 9 years ago)

Reply 503

tsrking

Also how is the currency depreciation done.
In questions like june 2013, 1b, are we allowed to talk about supply side and fiscal a lot then evaluate them then do monetary and evaluate that?

Reply 504

Razina17

Original post by Kutie Karen

Hi,

Can someone pleas explain the Harrod Domar model?

Its where the saving gap is filled in developing countries through FDI and aid to help them develop.

its shown how it would make a country grow/develop through this model

Reply 505

Edward Cullen

Original post by Kutie Karen

Hi,

Can someone pleas explain the Harrod Domar model?

the rate of growth equals the marginal propensity to save (which
provides funds for investment) divided by the capital-output ratio. So to increase the long term investment and to buy more capital we should save more which then contributes for the long run investments...

Reply 506

Dilzo999

Original post by Qmakz

Haha true that :smile:

and it's going really well now, I had to do the whole syllabus in a week but I basically did a no life and tortured myself but now I'm really good with it, did a mock yesterday on June 2013 paper for my teacher and got 86% and did another today and got 90%, I'm quite comfortable as I feel I did really well on unit 3, but want that A* especially since the boundaries tend to range from 70-80. What about you? Are you doing D1 M2 S2 fp3 also?

I'm doing FP2, M2, M3 and S1. Got it tomorrow and haven't even started XD.

Reply 507

Kutie Karen

Original post by Razina17

Its where the saving gap is filled in developing countries through FDI and aid to help them develop.

its shown how it would make a country grow/develop through this model

Thanks . That is great.

Reply 508

Razina17

Original post by tsrking

Also how is the currency depreciation done.
In questions like june 2013, 1b, are we allowed to talk about supply side and fiscal a lot then evaluate them then do monetary and evaluate that?

Could be done through lowering interest rates. For that question its best if you start with monetary first then go on to fiscal and supply then conclude which one you believe would be best to stimulate economic growth

Reply 509

Kutie Karen

Original post by Edward Cullen

Thanks. That is great. :smile:

Reply 510

Qmakz

Is it ok to suggest that china keeps it's exports competitive through the devaluation of it's currency if we justify this?
For example China exports huge amounts to the US, this increases for dollar and relatively increases of the yuan which should result in a depreciation of the Chinese yuan over longer periods of time, especially since china has a huge trade surplus and US has a huge deficit on the current account. So justification is that china dumps yuan onto the foreign exchange buying up the excess supply of dollars and storing them in the central bank in order to keeps it's currency pegged to the dollar, at this stage they then purchase US treasury bonds with those Excess US dollars with which the US funds it's fiscal deficit, the money entering the economy from US spending then gets used to buy Chinese goods and the cycle continues eg resulting in current account deficit on US and surplus in china however it is balanced as the treasury bond purchases are recorded on the financial account...is this too controversial?

(edited 9 years ago)

Reply 511

odbal

Assess macroeconomic policies which might be used to respond to rising commodity prices during a period of slow economic growth (30 marks)

how would you guys answer this?

Reply 512

Kutie Karen

How is everyone getting on? What do people think will come up? I am revising last minute stuff and keeping in touch with the tsr community for moral support.

Reply 513

Qmakz

Original post by Qmakz

Was meant to say supply of dollar increase relative to yuan which increases in demand

Reply 514

TheHenri

Original post by Dilzo999

. Most of the time 85-90+ marks will get you 120UMS.

Dilzo, why does a floating exchange rate cause depreciation?

Reply 515

Qmakz

Original post by odbal

Assess macroeconomic policies which might be used to respond to rising commodity prices during a period of slow economic growth (30 marks)

how would you guys answer this?

Stagflation?

Supply side policies to increase aggregate supply since slow economic growth would suggest that the inflation is not coming from demand side but rather supply side, I.e - cost push inflation maybe due to rising commodity prices such as oil or other things which contribute to the cost structures of firms,however the way I would do it is to combine both demand side policies with supply side policies, in an effort to shift the pressure of inflation to demand such that there will be manageable inflation but accompanied with economic growth so basically invest into capital equipment, education ( this can be nicely evaluated ) also talk about potential specialisation , privatidation and deregulation ( also easy to evaluate using examples of financial crisis how this may lead to disasters, eg deregulation of financial markets by repeal of the glass streagle act in 1999 and privatisation of Iceland banks is what was a major factor leading to the financial crisis. So therefore showing shift left ward of supply curve.

Then I would go into fiscal monetary policy. If you say reduce taxes in order to simulate demand could be evaluated by discscentives to work, also that if you are operating a fiscal deficit this may be compromising your ability to do so and put pressure on debt interest payments. But in general running a fiscal deficit to kick start economy and increase aggregate demand, I would always say Keynesian theory argues that fiscal deficits promote growth etc. Then for momentary policy go into possibility of reducing interest rates to encourage borrowing , evaluate how ECB has just dropped from 0.25 to 0.15 and that interest on ECB deposits is at - 0.1 % hence banks are taxed for having excess liquidity and are encouraged to lend money. Then show shift toward of demand curve , evaluation time lags in supply side policies, policies may kick in at different times, monetary policy may be ineffective (liquidity trap) there's just so much to do with this question :biggrin:

Reply 516

Dilzo999

Original post by Kutie Karen

How is everyone getting on? What do people think will come up? I am revising last minute stuff and keeping in touch with the tsr community for moral support.