Mav455
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Same as the ECON3 thread, I ask a question, whoever answers it asks the next question and so on

Define the European Union
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Advice Guru
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European Union-
a body of countries combined together to form one coalition in which economic and political powers are held.
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(Original post by Advice Guru)
European Union-
a body of countries combined together to form one coalition in which economic and political powers are held.

What is PPP (Purchasing Power Parity) ?
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Mav455
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(Original post by Advice Guru)
What is PPP (Purchasing Power Parity) ?
A theory that, in the long run, identical products and services in different countries should cost the same in different countries

What are the four freedoms of the Single European Market?
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gr8wizard10
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(Original post by Mav455)
A theory that, in the long run, identical products and services in different countries should cost the same in different countries

What are the four freedoms of the Single European Market?
Movement
Goods
Services
Capital

What contributes to National rate of unemployment?
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Mav455
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(Original post by Abdul-Karim)
Movement
Goods
Services
Capital

What contributes to National rate of unemployment?
Skills and Education
Labour Mobility
Flexibility of Labour Market
Pace of Structural Change in the Economy
Welfare reform/Government Initiatives

Factors that affect taxation revenues?
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Amin12345
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Level of income
Employment
Tax rate
Consumption
Efficiency for firms to make profits
And crackdown on tax avoidance

Why do country's stay undeveloped ?
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Mav455
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(Original post by Amin12345)
Level of income
Employment
Tax rate
Consumption
Efficiency for firms to make profits
And crackdown on tax avoidance

Why do country's stay undeveloped ?
The size of an economy e.g. population size, level of national income, large population which has low national income
Natural resource availability
The age structure of population-Ageing population
Relative size / importance of public and private sectors of the economy
Structural of national output e.g. primary, secondary, tertiary and quarternary sectors, more primary can lead to poverty, as service/tertiary is higher skilled and thus higher paid
Level and type of international trade
Political stability, strength of democratic institutions
Ethnic and gender equality
The ease with which new businesses can be created and sustained

Define the Income and Substitution Effects
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Amin12345
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Income and substitution effect are the central reason to demand sloping downwards.
As the price rises this will take a lager percentage of consumer income therefore consumers will spend less or switch products causing a substitution effect and income effect.

Explain the effects of "hot" money flows and the effect it has on balance of payments
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Mav455
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(Original post by Amin12345)
Income and substitution effect are the central reason to demand sloping downwards.
As the price rises this will take a lager percentage of consumer income therefore consumers will spend less or switch products causing a substitution effect and income effect.

Explain the effects of "hot" money flows and the effect it has on balance of payments
Hot money flows refer to capital transferred from one financial centre to another seeking the highest interest rates or the best opportunity for short-term gain, esp from changes in exchange rates, and it will strengthen the Balance of Payments


Present criticisms of Globalisation
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Amin12345
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Inequality
Primary product dependancy(due to over specialisation and comparative advantage)
Disruption of industries which produce high quality products as importing from china and Indian is relatively low.
Interdependence as countries are subjected to shocks from another, therefore recession is referred to as global recession as most countries suffered falling GDP
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What does it mean when a county has low reserve in terms of QE?
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Mav455
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(Original post by Amin12345)
What does it mean when a county has low reserve in terms of QE?
Sorry dunno how to do that, we havent gone over that.
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idelaghetto
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(Original post by Amin12345)
What does it mean when a county has low reserve in terms of QE?

It suggests they are trying to either control inflation through the supply of money (monetary variable) to decrease growth (contractionary monetary policy)

What is the interest rate transmission mechanism?
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gr8wizard10
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(Original post by Amin12345)
Income and substitution effect are the central reason to demand sloping downwards.
As the price rises this will take a lager percentage of consumer income therefore consumers will spend less or switch products causing a substitution effect and income effect.
I don't believe this to be the Income & Substitution effect.

The Income and substitution effect refers to the backward bending individual supply curve of labour.

The Substition effect assumes that as wage rates rise an individual is likely to be incentivised to substitute a marginal hour of leisure for work.

The income effect refers to when an individual has reached his optimal wage rate and doesn't require any further income (be it per hour/ per month/ per year). At this stage a person earning a higher wage rate will substitute a marginal hour of work for leisure.

This shows the trade of between leisure and work for an individual.

Correct me if I'm wrong
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Amin12345
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http://economics-exposed.com/why-dem...-to-the-right/
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Amin12345
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http://economics-exposed.com/why-dem...-to-the-right/
Questions can be interpreted in many ways
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Mav455
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(Original post by idelaghetto)
It suggests they are trying to either control inflation through the supply of money (monetary variable) to decrease growth (contractionary monetary policy)

What is the interest rate transmission mechanism?
The interest rate transmission mechanism shows how changes in the interest rate can affect aggregate demand in various ways. For example, household demand is affected as changes in interest rates can affect savings, which indirectly affect spending, as well as consumer and business confidence
For those with debt or mortgage repayments, a change in interest rates affects how much they must input into the process, hence individuals will have more or less income after paying these off.

Define the main methods of trade barriers
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DrakAhm
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(Original post by Mav455)
The interest rate transmission mechanism shows how changes in the interest rate can affect aggregate demand in various ways. For example, household demand is affected as changes in interest rates can affect savings, which indirectly affect spending, as well as consumer and business confidence
For those with debt or mortgage repayments, a change in interest rates affects how much they must input into the process, hence individuals will have more or less income after paying these off.

Define the main methods of trade barriers


Tariffs or Import Duties: Basically just taxes on imported goods.

Regulations: Laws and any health and safety measures that need to be carried out when importing/exporting goods. Could end up complicating the process of trade, but are important to carry out in order to ensure overall safety.

Quotas: A limit on how much of a product can be imported into a country. EG: 50 Tons of Steel

Embargo: Completely banning imports form another country.

Voluntary Export Restraints: This is when countries actually agree to limit the number of imports. So its similar to quotas but its agreed.

Subsidies: If the government gives a local firm a subsidy so they can develop domestically, it will also give them a competitive advantage

If you can think of any more, feel free to add.

Question: Explain the Marshall-Lerner Condition.

Good luck to whoever is brave enough to explain that, cos I can seem to get my head around it!
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Mav455
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(Original post by DrakAhm)
Tariffs or Import Duties: Basically just taxes on imported goods.

Regulations: Laws and any health and safety measures that need to be carried out when importing/exporting goods. Could end up complicating the process of trade, but are important to carry out in order to ensure overall safety.

Quotas: A limit on how much of a product can be imported into a country. EG: 50 Tons of Steel

If you can think of any more, feel free to add.

Question: Explain the Marshall-Lerner Condition.

Good luck to whoever is brave enough to explain that, cos I can seem to get my head around it!
Marshall-Lerner condition states that a real depreciation of a currency will improve the trade balance if the sum of the elasticities of the demand for imports and exports is greater than one,

So if PeD for Imports + PeD for Exports > 1, then a depreciation will improve the trade balance

Explain a case FOR a Floating Exchange Rate
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