F585 OCR: The Global Economy 2014

Any suggestions on possible questions for the global economy exam?

I was thinking this may be a potential question:

"Comment on the benefits of an internal devaluation of a currency compared to an external devaluation."

Possible 20 mark questions:

"Analyse the likely effects of a slowdown in the world economy on the economic performance of primary commodity exporters in SSA"

"Rising commodity prices are a double-edged sword for SSA exporters. Discuss"

Reply 1

Rickrossmmg

what is internal devluation and how is it done? i keep getting the explanation for this mixed up as i thought its when a government uses contractionary fiscal policy to reduce AD and so unemployment increase sleading to a fall in wage pressure,and so the fall in wage pressure feeds through as lower prices to consumers as cheaper goods

Reply 2

username1053693

Original post by Rickrossmmg

Yeah fiscal tightening, where they rise taxes and cut government spending

-Also, cut public sector wages dramatically, so that unit labour costs fall. This drives down costs, which then make exports cheaper, and so an increase in sales should occur
-Rises in VAT (3%)

These are deflationary policies so AD should decrease (cutting wages are, as it leaves people with less disposable income, although the increase in exports you would expect, should lead to a rise in AD). As they are reducing AD, this should be putting downward pressure on inflation.