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Economics Unit 2 Edexcel - Managing the UK economy Tuesday 19th May 2015 (PM) Watch

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    (Original post by nurav11)
    Thanks a lot! These are very helpful. Sadly, just seen last year's paper and effects of a fall in interest rates was one of the 30 markers . Still is likely to come up at some point in the paper though mind.
    how are you preparing for tomorrow? D:
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    (Original post by jshep000)
    Current account deficit is related to balance of payments, where it is a negative value so imports are greater than exports. Budget deficit is where government spending is greater than taxation
    Is the HDI a compostie measure of living factors which involves physical quality of life indcators such as: education(literacy rates and schooling years),income(Purchasing Power Parity XR) and life expectancy?

    Benefits of HDI-
    Cant hide inequality
    Physical Quality of Life Indicators

    DADV
    No political or social freedoms in the measure
    Not all countries have the available data

    GDP
    DADV - Hides inequality
    No Physical Quality of Life Indicators

    ADV
    Quick and Easy to analyse
    Widely Known Measure





    Unemployment - when a person is willing and able to work but cannot find work at the current market equlilbrium wage rate.

    Frictional Unemployment - a short term employment e.g. seasonal,casual or part time

    Structural unemployment - a long term level of unemployment,when there is a mismatch between the characteristics of the labourforce and the jobs available.

    Is this all correct?
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    (Original post by nurav11)
    I don't think it's a good idea to go micro as then it doesn't become very relevant to a 'macroeconomic objective'. That case won't apply to every single labour market (shortage of labour) and so wouldn't have any overall effect on wages rising in an economy. If you take it like, lower levels of unemployment in the economy through a sustained period of economic growth mean that more people have a regular wage leading to more people having disposable incomes thus increasing consumption and causing demand-pull inflation. You can also illustrate this by the Phillips Curve.

    Generally, wages won't rise when there's low levels of unemployment in an economy so you won't get inflation like that
    oh gaaad :') my bad, can u please explain it using an example? like i dont understand how lower levels of unemployment in the economy through a sustained period of economic growth will mean more people have regular wage which means more people have more disposable income? XD x btw thanks for correcting, reall appreciate it!
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    (Original post by scrawlx101)
    Is the HDI a compostie measure of living factors which involves physical quality of life indcators such as: education(literacy rates and schooling years),income(Purchasing Power Parity XR) and life expectancy?

    Benefits of HDI-
    Cant hide inequality
    Physical Quality of Life Indicators

    DADV
    No political or social freedoms in the measure
    Not all countries have the available data

    GDP
    DADV - Hides inequality
    No Physical Quality of Life Indicators

    ADV
    Quick and Easy to analyse
    Widely Known Measure





    Unemployment - when a person is willing and able to work but cannot find work at the current market equlilbrium wage rate.

    Frictional Unemployment - a short term employment e.g. seasonal,casual or part time

    Structural unemployment - a long term level of unemployment,when there is a mismatch between the characteristics of the labourforce and the jobs available.

    Is this all correct?
    Yup! Apart from fictional unemployment, that is when you're moving between jobs for a short time period. Not to do with seasonal/casual/part time
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    (Original post by scrawlx101)
    Is the HDI a compostie measure of living factors which involves physical quality of life indcators such as: education(literacy rates and schooling years),income(Purchasing Power Parity XR) and life expectancy?

    Benefits of HDI-
    Cant hide inequality
    Physical Quality of Life Indicators

    DADV
    No political or social freedoms in the measure
    Not all countries have the available data

    GDP
    DADV - Hides inequality
    No Physical Quality of Life Indicators

    ADV
    Quick and Easy to analyse
    Widely Known Measure





    Unemployment - when a person is willing and able to work but cannot find work at the current market equlilbrium wage rate.

    Frictional Unemployment - a short term employment e.g. seasonal,casual or part time

    Structural unemployment - a long term level of unemployment,when there is a mismatch between the characteristics of the labourforce and the jobs available.

    Is this all correct?
    Yh what u said is right, but just make sure that you know that there is 5 different types of unemployment:
    - Classical/ real wageunemployment: unemployment occurred when wages aretoo high for employers to hire workers – this idea of unemployment dominatedthe economic theory before the 1930s when workers were blamed for not acceptinglower wages.- Cyclical/demand-deficient/ Keynesian unemployment: whenindividuals lose their jobs as a result of a downturn in aggregate demand. Forexample, in the most recent recession of 2008-2010, the unemployment levelsrose to 2.4 million in 2009 and also peaked over 2.5 million during 2010.- Seasonal unemployment: when workers are unemployed at certain times of the year – inindustries such as tourism, farming and construction.- Structural unemployment: occurs when certain industries decline because of long termchanges in market conditions, for example over the last 20 ears, motor vehicleproduction has declined whilst car production has increased.- Fictional/ searchunemployment: when workers lose their job and are inthe process of finding another one.
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    Can someone please explain how GNI is calculated?
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    I hate the little pesky 4, 6 and 8 markers more than any questions lmao.
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    (Original post by Magnesium)
    how are you preparing for tomorrow? D:
    I really wanted that 30 marker on interest rates as there's so much you could say haha. Now just hitting the past papers and checking my points through with mark schemes and adjusting it to what it wants. It's quite hilarious how things like 'state real output increases' gets 2 marks. The use of data gets 2 marks aswell, it's amazing . Wbu?

    (Original post by Emmak26)
    oh gaaad :' my bad, can u please explain it using an example? like i dont understand how lower levels of unemployment in the economy through a sustained period of economic growth will mean more people have regular wage which means more people have more disposable income? XD x btw thanks for correcting, reall appreciate it!
    Yeh ofc! No worries . Basically, if there is say 4% level of unemployment in an economy, you will have 4% of the workforce who don't have a regular wage, right? (As they don't have a job). Therefore, they'll be spending less on goods and services since they don't have that much money to spend in the first place. Say, this level falls to 2%. Then an extra 2% of the workforce will now have jobs, meaning they'll have a regular wage with which they'll get more money than they did when they were unemployed. Therefore, their disposable income level will rise and as a result, they'll be able to spend more of that money on goods and services, hence increasing consumption. Consumption rising shifts AD outwards and so you get demand pull inflation. Essentially, more people in a job = more consumption = more inflation.

    What you said earlier was correct aswell, it's just that it was micro because it would only apply to one particular firm or business, not a whole economy. So wages would rise for DJs but that doesn't imply wages will rise for everyone. Hope this helps
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    (Original post by scrawlx101)
    Is the HDI a compostie measure of living factors which involves physical quality of life indcators such as: education(literacy rates and schooling years),income(Purchasing Power Parity XR) and life expectancy?

    Benefits of HDI-
    Cant hide inequality
    Physical Quality of Life Indicators

    DADV
    No political or social freedoms in the measure
    Not all countries have the available data

    GDP
    DADV - Hides inequality
    No Physical Quality of Life Indicators

    ADV
    Quick and Easy to analyse
    Widely Known Measure





    Unemployment - when a person is willing and able to work but cannot find work at the current market equlilbrium wage rate.

    Frictional Unemployment - a short term employment e.g. seasonal,casual or part time

    Structural unemployment - a long term level of unemployment,when there is a mismatch between the characteristics of the labourforce and the jobs available.

    Is this all correct?
    Another disadvantage of GDP that has come up in an exam before is the problems with population. For example, one country may have a higher level of GDP than another country due to the higher population meaning that their workforce is bigger. It doesn't necessarily mean that the country is growing faster, because the GDP might be distributed unevenly so GDP per capita would be a better measure.

    Also frictional unemployment is when someone is in between jobs. It's different to seasonal unemployment which is when people are unemployed at certain times of the year (eg. in tourism)
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    Inflation
    - a sustained rise in the general price level

    Demand Pull Inflation is due to an increase/shift in AD

    Cost Push Inflation is due to an increase the COP via an increase in the price of raw materials

    Budget Deficit G>T when the government spends more than it taxes?

    Current Account Deficit M>X

    Current Account contains:

    (X-M)

    Trade in Goods and Services

    Investment Income from shares abroad?

    Transfer Payments e.g. Aid or Remittance Payments back home.


    Benefits of Eco Growth

    Increase EMployment
    Increase Standards of Living and decrease poverty
    Greater Choice?
    Increase international competitveness and economic status and power

    Dadv/Eval

    High Inflation
    Increased Income Inequality- rich get richer since they own most firms poor potentially get poorer since wages dont rise as much
    People may spend more on exports
    Depends on MPC which in the Uk is 0.6?

    This all correct,what needs tweaking?
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    Heyyy, when drawing AS diagrams what one should you use? Short run (If i'm right, the one like normal supply??), the LRAS that's vertical (?), or the keynsian curved one???
    When is each appropriate? Is it worth looking at more than one type?? :flower2:
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    (Original post by nurav11)
    I really wanted that 30 marker on interest rates as there's so much you could say haha. Now just hitting the past papers and checking my points through with mark schemes and adjusting it to what it wants. It's quite hilarious how things like 'state real output increases' gets 2 marks. The use of data gets 2 marks aswell, it's amazing . Wbu?



    Yeh ofc! No worries . Basically, if there is say 4% level of unemployment in an economy, you will have 4% of the workforce who don't have a regular wage, right? (As they don't have a job). Therefore, they'll be spending less on goods and services since they don't have that much money to spend in the first place. Say, this level falls to 2%. Then an extra 2% of the workforce will now have jobs, meaning they'll have a regular wage with which they'll get more money than they did when they were unemployed. Therefore, their disposable income level will rise and as a result, they'll be able to spend more of that money on goods and services, hence increasing consumption. Consumption rising shifts AD outwards and so you get demand pull inflation. Essentially, more people in a job = more consumption = more inflation.

    What you said earlier was correct aswell, it's just that it was micro because it would only apply to one particular firm or business, not a whole economy. So wages would rise for DJs but that doesn't imply wages will rise for everyone. Hope this helps
    OMG thank you sooo much! are you taking the exam tomorrow? If you are, than that is guaranteed A for you my friend!
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    (Original post by barbiex)
    Can someone please explain how GNI is calculated?
    GNI (Gross National Income) = Income from residents of that country + any income from abroad

    Correct me if I'm wrong, but it is mainly GDP, HDI, etc that is asked for when related to standards of living. I don't think it will ever refer directly to GNI
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    (Original post by _moriartea)
    Heyyy, when drawing AS diagrams what one should you use? Short run (If i'm right, the one like normal supply??), the LRAS that's vertical (?), or the keynsian curved one???
    When is each appropriate? Is it worth looking at more than one type?? :flower2:
    I've always been taught that the LRAS curve is the best one to use because you can show the spare capacity in an economy on it. Also because most supply side policies are more beneficial in the long run than they are in the short run.
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    Can anyone explain balance of payments simply please
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    (Original post by _moriartea)
    Heyyy, when drawing AS diagrams what one should you use? Short run (If i'm right, the one like normal supply??), the LRAS that's vertical (?), or the keynsian curved one???
    When is each appropriate? Is it worth looking at more than one type?? :flower2:
    It doesn't matter which diagram you use as all will be credited
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    (Original post by Emmak26)
    OMG thank you sooo much! are you taking the exam tomorrow? If you are, than that is guaranteed A for you my friend!
    Haha yeh I am, thanks so much! I'm sure you'll smash this too! Best of luck haha
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    (Original post by freya98)
    Can anyone explain balance of payments simply please
    The balance of payments is the balance between money going in and out of a country. It's divided into the current account and the capital account.
    The current account is divided into trade, transfers and investment.
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    (Original post by aniqaaai)
    I've always been taught that the LRAS curve is the best one to use because you can show the spare capacity in an economy on it. Also because most supply side policies are more beneficial in the long run than they are in the short run.
    (Original post by Magnesium)
    It doesn't matter which diagram you use as all will be credited
    Thank you <3
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    (Original post by freya98)
    Can anyone explain balance of payments simply please
    It's simply a record of international payments that a country makes over the course of a year. It is a macroeconomic objective to have an equilibrium in the balance of payments, so basically you want your records to be balanced.

    For AS all you need to know is the current account which is the trade in goods, services, investment and transfers.

    A current account deficit is when more money is flowing out of the country than flowing in. It can be caused by the currency being too strong, meaning that exports are more expensive and imports are cheaper, so you import more and export less which creates a disequilibrium. High wage costs and high levels of growth can cause a deficit as well because people may have more disposable income that they want to spend on imported goods, meaning that the country imports more.

    A current account surplus is more money flowing in to the country than flowing out. This can be caused by the opposite of what causes a deficit. So weaker currency, low wages and low growth.

    Evaluation can be that a current account surplus isn't always beneficial because it can cause inflationary measures. This is the conflict that occurs between BoP and Inflation because to sustain inflation the MPC may increase interest rates which could cause exchange rates to go up, making exports more expensive and imports cheaper. BUT the UK has a marginal propensity to import due to our lack of raw materials etc.

    I hope this made sense!
 
 
 
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