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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 AJC1997)
    Privatisation is a supply side policy that involves selling state owned assets to the private sector. It is argued that the private sector is more efficient in running businesses because they have a profit motive to reduce costs and develop better services.
    An example of this could be the Royal Mail, which has been privatised (since 2013- not sure!) They gave employees a small percentage of shares I believe which helped boost their morale and incentives to work.
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    (Original post by TeddyBearMike)
    So im guessing a couple EVA points could be that it could potentially lead to monoplies,inequality etc......
    Yup exactly, also the government misses out on potential dividends as many of the firms that are privatised are quite profitable and instead the profits go to their wealthy shareholders.
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    30 marker on ways to improve standard of living? Or maybe something on the effects of immigration? :/ what does everyone think
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    (Original post by Hai_Ann)
    Can anyone explain in detail about the effects/consequences of deflation?

    I know that profits will fall and it will be hard to recover and keep the economy growing.

    But I want explicit detail and more points. Thanks ^^
    1. People tend to save their money, as they are postponing purchases, waiting for goods to become even cheaper (As prices are falling) reducing consumption, therefore AD
    2. Businesses may leave the country, reducing national output and reducing employment.
    3. It suggests the economy is doing badly (More of a political concern)
    4. Just like Inflation, if the deflation is rapid, there will be administrative costs, such as menu costs, whereby businesses have to update their price tags, their computer systems and so on to keep up with the changing prices. This is an increased production cost, as it often requires labour to do it all.
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    (Original post by blank101)
    What are the economics effects of the sterling apprecaiting against the euro?
    -SPICED
    -Strong pound leads to cheap imports but exports are more expensive
    -Increase in the level of leakages (imports)
    -Potentially lead to a decrease in consumption of goods within the economy
    -Thus resulting in a decrease in AD
    -Investement likely to decrease due to a lack of international competiviness
    -AS decrease leading to unemployment

    Could argue , PED of exports, effects are only short term since the other policies are likely to react to the situation.

    Plenty of other eva points cant think of any,
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    (Original post by blank101)
    What are the economics effects of the sterling apprecaiting against the euro?
    Good way to remember it is S.P.I.C.E.D
    A Strong Pound means Imports are Cheaper and Exports are Dearer, therefore balance of payment deficit worsens, i'm sure you can figure out why
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    (Original post by eatthetree)
    30 marker on ways to improve standard of living? Or maybe something on the effects of immigration? :/ what does everyone think
    Standards of living has come up a couple of times in recent years, I think it came up last year, so that's unlikely. As for Immigration, that seems more like a Unit 1 question, If it comes up it will probably be a 12 marker, as there wouldn't be an awful lot to write. I think it could be on Conficts between policies, or justifying the use of Supply Side policy's for meeting government objectives.
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    (Original post by Hai_Ann)
    Can anyone explain in detail about the effects/consequences of deflation?

    I know that profits will fall and it will be hard to recover and keep the economy growing.

    But I want explicit detail and more points. Thanks ^^
    Consumers could end up saving more, since they will think that prices will fall in the future, so hold out for a better deal. This decreases consumption, a component of AD, so AD decreases.

    As a result, GDP decreases, which means economic growth is lower. Then talk about elasticity and where the equilibrium point is on the AS curve, which will affect the magnitude of the outcome.

    You could also argue that investment would decrease since confidence is lower, which would have the same effects.
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    (Original post by irMike)
    Any idea as to why UK Competitiveness will increase productivity? I understand that if markets have more competition, then there is an incentive to be more efficient and productive. But the revision guide implies that If a firm is more internationally competitive, they will produce more/be more productive.

    Anyone know the reason for this?
    basically in order to take control of the highest percentage of trade in that market therefore earn the most profit
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    (Original post by MarkGavin)
    Hello all,
    My name is Mark Gavin and I am currently the Economics head examiner at Edexcel. I was recently notified I am soon to be laid off so I decided to get my own back and give all of you a treat! I shall give you the 30 markers of the two options.
    1. Assess the impact on unemployment of an increase in the tax rate on earnings above £150,000
    2. Evaluate the consequences on economic growth of a deflationary spiral
    The mark scheme is tough this year as well so you really need to know your stuff!
    Wait, what??
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    (Original post by .JC.)
    Consumers could end up saving more, since they will think that prices will fall in the future, so hold out for a better deal. This decreases consumption, a component of AD, so AD decreases.

    As a result, GDP decreases, which means economic growth is lower. Then talk about elasticity and where the equilibrium point is on the AS curve, which will affect the magnitude of the outcome.

    You could also argue that investment would decrease since confidence is lower, which would have the same effects.
    I was confused as to why consumption would decrease but you explained that. Thanks.
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    (Original post by irMike)
    1. People tend to save their money, as they are postponing purchases, waiting for goods to become even cheaper (As prices are falling) reducing consumption, therefore AD
    2. Businesses may leave the country, reducing national output and reducing employment.
    3. It suggests the economy is doing badly (More of a political concern)
    4. Just like Inflation, if the deflation is rapid, there will be administrative costs, such as menu costs, whereby businesses have to update their price tags, their computer systems and so on to keep up with the changing prices. This is an increased production cost, as it often requires labour to do it all.
    Thanks! Now gonna memorise them all *_*
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    what exactly is PED of exports and imports and what effects them
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    General evaluation techniques you can use, which apply to pretty much all questions, especially 30 markers:

    - Short run and Long run - in the short run, X policy e.g increased spending on education will be costly, but in the long run the benefits could outweigh the costs.

    - Time Lags - e.g increased spending on education will not show benefits immediately, it will take years (of education and training) for the benefits to be implemented.

    - Magnitude - i.e if it is only a small scale impact, e.g only a small shift in AD/AS, the consequences probably won't be felt.

    - Location of Equilibrium - if the equilibrium point is on the Keynesian part of the AS curve, then a shift in AD will only affect GDP and not price, similarly if it's on the classical part of the curve GDP will be unaffected and the average price level won't.

    - Elasticity - strictly a micro topic, but you can speak briefly about how the elasticity of the curves will affect the outcome of a shift in one or the other.

    - Other factors - a lot to write about here. Other factors of AD, or that affect whatever the question is regarding.

    - Specific evaluation of question - there will usually be a specific evaluation point where you need to apply your knowledge and the information given to you. Easy way to pick up marks if you can identify it.
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    (Original post by yaya sanogo)
    Wait, what??
    It BS
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    (Original post by anushkagupta4)
    what exactly is PED of exports and imports and what effects them
    Well PED of exports/imports is the responsiveness of demand to a change in price of exports/imports.

    The UK is a net importer, meaning it's demand for imports is relatively inelastic. This is because we need oil and other raw materials for the manufacturing process which we can only obtain via importing.
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    (Original post by .JC.)
    General evaluation techniques you can use, which apply to pretty much all questions, especially 30 markers:

    - Short run and Long run - in the short run, X policy e.g increased spending on education will be costly, but in the long run the benefits could outweigh the costs.

    - Time Lags - e.g increased spending on education will not show benefits immediately, it will take years (of education and training) for the benefits to be implemented.

    - Magnitude - i.e if it is only a small scale impact, e.g only a small shift in AD/AS, the consequences probably won't be felt.

    - Location of Equilibrium - if the equilibrium point is on the Keynesian part of the AS curve, then a shift in AD will only affect GDP and not price, similarly if it's on the classical part of the curve GDP will be unaffected and the average price level won't.

    - Elasticity - strictly a micro topic, but you can speak briefly about how the elasticity of the curves will affect the outcome of a shift in one or the other.

    - Other factors - a lot to write about here. Other factors of AD, or that affect whatever the question is regarding.

    - Specific evaluation of question - there will usually be a specific evaluation point where you need to apply your knowledge and the information given to you. Easy way to pick up marks if you can identify it.
    Nice work dude!
    To what extent might fiscal policy help the UK government achieve its macroeconomic objectives?
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    (Original post by AJC1997)
    Well PED of exports/imports is the responsiveness of demand to a change in price of exports/imports.

    The UK is a net importer, meaning it's demand for imports is relatively inelastic. This is because we need oil and other raw materials for the manufacturing process which we can only obtain via importing.
    Also UK citizens have a very high MPM due to the fact that the UK is a service economy and doesn't produce many goods. Therefore, the UK manufacturing industry cannot produce the right substitutes for many imported goods.
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    can someone explain HDI please
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    (Original post by AJC1997)
    Well PED of exports/imports is the responsiveness of demand to a change in price of exports/imports.

    The UK is a net importer, meaning it's demand for imports is relatively inelastic. This is because we need oil and other raw materials for the manufacturing process which we can only obtain via importing.
    so what would be the effect of us being import inelastic that even when exchange rate fall and the balance of payments should be closer to equilibrium as exports are cheaper but due to the inelastic nature of imports there would be a small decrease in the volume of imports and consumers and firms would pay the higher price?
 
 
 
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