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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 Magnesium)
    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
    Thank you v much
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    (Original post by aniqaaai)
    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!
    Thank you that's reallyhelpfulhelpful
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    (Original post by nurav11)
    Haha yeh I am, thanks so much! I'm sure you'll smash this too! Best of luck haha
    aww thank you! kinda need all the luck i need :') good luck to you too! let me know how u find it after da exam tomorrow! :clap2:
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    Any detailed explanation how inflation could lead to unemployment?
    Thank you!
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    18 1/2 hours till the exam, wish I could just sit it now!
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    (Original post by prepdream)
    Any detailed explanation how inflation could lead to unemployment?
    Thank you!
    Inflation is typically manipulated by the Monetary Policy Committee and to sustain inflation they may increase interest rates. This means that people save more as they get higher returns and spend less as it costs more to borrow, resulting in less money flowing in the economy. This might mean that firms are unable to sell as many goods and services leading to them having to lay off workers, which means higher unemployment.

    Also the government might increase taxes to control inflation which means people have less disposable income and so consumption as a component of aggregate demand reduces leading to the same effects as above.

    The same applies for controlling unemployment because the government might spend more to train and educate workers which increases the overall spending in the economy and would make prices rise = inflation.

    Do you know the Phillips curve? It shows that you can't have both sustainable inflation and low unemployment and that can be used as evaluation.
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    Hey everyone my teacher said today how the new rate of inflation is coming out tomorrow and that its most likely going to be deflationary but that we shouldn't focus too much on as its most likely going to change again in september. she basically said that she'll tell us before the exam (which is probably why the exam is in the afternoon unlike unit 1) and that we should briefly mention it but not go into too much depth on it
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    (Original post by Emmak26)
    aww thank you! kinda need all the luck i need :' good luck to you too! let me know how u find it after da exam tomorrow! :clap2:
    You'll be fine , just focus on making all the right amount of points for each question/puttin data and definitions/graphs wherever necessary and you'll get a load of marks just like that! Thanks , ofc, we'll discuss it all

    (Original post by prepdream)
    Any detailed explanation how inflation could lead to unemployment?
    Thank you!
    More often than not, low levels of unemployment causes inflation rather than inflation causing unemployment (scroll up for an explanation on this ).
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    how would you describe supply side policies in a 30 marker, we werent really taught it well
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    Guys.. Quick Quiz:

    1) How is CPI Measured?
    2) What is the difference between CPI and RPI?
    3) Explain 2 ways of measuring unemployment.
    4) Give advantages and disadvantages of the methods explained above.
    5) What are the 3 injections and withdrawals into and out of the circular flow of income?

    Feel free to post 5 more questions after you have answered these one (short + snappy ones, not long, detailed ones) and myself and fellow users will answer and so on...
    A chain of questions!

    Good luck peeps.
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    Could some please explain the possible trade off between inflation and the equilibrium on the balance of payments please? It is mentioned in the spec
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    (Original post by yaya sanogo)
    how would you describe supply side policies in a 30 marker, we werent really taught it well
    To improve long term productive potential of the economy? Privatisation, Investment in technologies, Investment in education, Investment in health, subsidies to SMEs, reducing immigration laws, reducing minimum working age, increasing retirement age, reducing trade/worker union powers... Anything that basically affects quality and quantity of factors of production which will increase productive potential permanently (importantly NOT costs of factors of production).

    Evaluations: Privatisation could lead to monopolies and if all public assets are sold to one firm, giving no increase in quality/quantity of goods and services, all of the investments you can talk about opportunity cost of government expenditure or increasing budget deficit/national debt.
    Immigration I'd stick to magnitude of new workers coming in and whether or not they are skilled or not so you can talk about how/where they would contribute to the economy.
    Final 3, dubious human rights, lowering living standards as people get tired more easily working longer hours/child labour is bad etc etc.

    Not sure if this is what you were looking for but these are the general supply side polices we were taught/a couple I came up with now
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    (Original post by nurav11)
    To improve long term productive potential of the economy? Privatisation, Investment in technologies, Investment in education, Investment in health, subsidies to SMEs, reducing immigration laws, reducing minimum working age, increasing retirement age, reducing trade/worker union powers... Anything that basically affects quality and quantity of factors of production which will increase productive potential permanently (importantly NOT costs of factors of production).

    Evaluations: Privatisation could lead to monopolies and if all public assets are sold to one firm, giving no increase in quality/quantity of goods and services, all of the investments you can talk about opportunity cost of government expenditure or increasing budget deficit/national debt.
    Immigration I'd stick to magnitude of new workers coming in and whether or not they are skilled or not so you can talk about how/where they would contribute to the economy.
    Final 3, dubious human rights, lowering living standards as people get tired more easily working longer hours/child labour is bad etc etc.

    Not sure if this is what you were looking for but these are the general supply side polices we were taught/a couple I came up with now
    You are actually a legend at economics
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    (Original post by yaya sanogo)
    how would you describe supply side policies in a 30 marker, we werent really taught it well
    Supply side policies are those implemented by the gov to alter levels of production within an economy.
    They include ways to improve productivity

    1) Improving healthcare - means that a greater proportion of the population is able to work and so production levels increase. (evaluation - not everyone uses healthcare and magnitude of effect is low, sometimes giving benefits is cheaper that more investment in health)

    2) Education - Long term free provision of education means more students graduate and find better jobs, they become skilled and talented and can produce more (evaluation - time lag caused by this and so gov invests in training of those already employed)

    3) Training of employed workers - means that workers become skilled by their employees and can produce more within a short time period (evaluation - specialisation usually leads to boredom and quality of produce may suffer)

    4)Lowering co op tax - means firms make more investment / also giving subsidies means firms can produce more (evaluation - there is an opp cost to this and gov can spend elsewhere eg healthcare)

    Hope this helps, PM me if you need anything else
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    (Original post by nurav11)
    To improve long term productive potential of the economy? Privatisation, Investment in technologies, Investment in education, Investment in health, subsidies to SMEs, reducing immigration laws, reducing minimum working age, increasing retirement age, reducing trade/worker union powers... Anything that basically affects quality and quantity of factors of production which will increase productive potential permanently (importantly NOT costs of factors of production).

    Evaluations: Privatisation could lead to monopolies and if all public assets are sold to one firm, giving no increase in quality/quantity of goods and services, all of the investments you can talk about opportunity cost of government expenditure or increasing budget deficit/national debt.
    Immigration I'd stick to magnitude of new workers coming in and whether or not they are skilled or not so you can talk about how/where they would contribute to the economy.
    Final 3, dubious human rights, lowering living standards as people get tired more easily working longer hours/child labour is bad etc etc.

    Not sure if this is what you were looking for but these are the general supply side polices we were taught/a couple I came up with now
    Sweet cheers
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    (Original post by chemistryislove)
    Could some please explain the possible trade off between inflation and the equilibrium on the balance of payments please? It is mentioned in the spec
    High inflation will worsen the current account. This is because inflation causes price level to rise, therefore export becomes more expensive and import becomes cheaper. There will be less export and more import, so worsen current account.
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    The question says 'how might the 'fiscal (budget) deficit' help the government achieve its macroeconomic objectives? I don't understand this point in the marking scheme as it looks a bit jumbled up. If the governments macroeconomic objective of the government is to reduce unemployment then why is the marking scheme for the analysis part saying that it increases unemployment?

    This is the answer on the marking scheme:
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    can someone pls explain to me the evaluation points of all the policies pls? thanks
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    Can someone tell me why a balance of payments deficit would cause the interest rate to fall?
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    (Original post by badaman)
    You are actually a legend at economics
    Hahha thanks a lot man , I try my best. Sadly this exact question was last year's 30 marker so it's very unlikely to come up again. But nevertheless, still important to know.

    (Original post by yaya sanogo)
    Sweet cheers
    No probs
 
 
 
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