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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 dripper)
    More employment = more inflation, as the general price level increases since consumers have more disposable income increasing AD

    However, increased inflation, could lead to stagflation if the economy is not growing enough and workers would demand higher wages since purchasing power has fallen forcing companies to lay off workers leading to a rise in unemployment.
    Thanksss
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    what do u think is going to come
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    For the '1) Assess the use of fiscal policies to improve the standard of living' question. Would an increase in the SOL be represented by AD shifting to the right, as wages increases they have more disposable income and there's an increase quality and quantity of goods and services'.
    And as an EV you could say that there's risk of hyperinflation and so wages may infact be lower than the previous years?
    Is this correct, I always get fairly confused with the SOL of living Qs. Hoping for a 30 marker on supply side policies, macroeconomics objectives or reduction in the national debt.
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    This is probably going to make myself look like an idiot, but what's the difference between an output gap and spare capacity?
    Or are they the same thing and the output gap represents the spare capacity?
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    (Original post by TomAyy)
    This is probably going to make myself look like an idiot, but what's the difference between an output gap and spare capacity?
    Or are they the same thing and the output gap represents the spare capacity?
    You've got it in the last sentence )
    When there are spare unemployed resources in the economy, there is an output gap. this is shown on an AD/AS diagram, full capacity would be at the top of the AS curve. Its also on a PPF in a micro sense if the point is inside the PPF.
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    Would we be able to resit unit 1 and 2 next year before unit 3 and 4 exams?
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    Yeah you would resit (let's hope you don't have to) at the same time as next year's AS

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    (Original post by Ec0n)
    For the '1) Assess the use of fiscal policies to improve the standard of living' question. Would an increase in the SOL be represented by AD shifting to the right, as wages increases they have more disposable income and there's an increase quality and quantity of goods and services'.
    And as an EV you could say that there's risk of hyperinflation and so wages may infact be lower than the previous years?
    Is this correct, I always get fairly confused with the SOL of living Qs. Hoping for a 30 marker on supply side policies, macroeconomics objectives or reduction in the national debt.
    yes, id also mention something about income inequality increasing also
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    (Original post by yaya sanogo)
    POSSIBLE 30- MARKERS: ACCORDING TO TUTOR2U BASED ON CURRENT ECONOMIC CLIMATE
    1) Assess the use of fiscal policies to improve the standard of living
    2) Assess the policies that might be used to prevent deflation in the UK
    3) Evaluate policies the UK govt. can use to reduce unemployment WITHOUT rising inflation
    4) Evaluate benefits of falling unemployment for the UK economy
    5) Evaluate the likely economic effects of the UK exchange rate appreciating against the Euro
    can u help draft these, as in put like what each paragraph would be, + eval points xxx
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    (Original post by Ec0n)
    For the '1) Assess the use of fiscal policies to improve the standard of living' question. Would an increase in the SOL be represented by AD shifting to the right, as wages increases they have more disposable income and there's an increase quality and quantity of goods and services'.
    And as an EV you could say that there's risk of hyperinflation and so wages may infact be lower than the previous years?
    Is this correct, I always get fairly confused with the SOL of living Qs. Hoping for a 30 marker on supply side policies, macroeconomics objectives or reduction in the national debt.
    I think the risk of hyperinflation is pushing it a bit..maybe just stick to saying real wages might fall for people on fixed incomes

    otherwise you have the basic gist of SOL down
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    Can someone explain how there can be high employment when inflation is low please!
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    (Original post by falloutboyyy)
    can u help draft these, as in put like what each paragraph would be, + eval points xxx
    3) Evaluate policies the UK govt. can use to reduce unemployment WITHOUT rising inflation

    Name:  Screen Shot 2015-05-17 at 18.51.20.jpg
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    This might help you, its not really about not increasing inflation though.
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    (Original post by laurelbrownbear)
    3) Evaluate policies the UK govt. can use to reduce unemployment WITHOUT rising inflation

    Name:  Screen Shot 2015-05-17 at 18.51.20.jpg
Views: 226
Size:  77.6 KB

    This might help you, its not really about not increasing inflation though.
    If that question comes up I dont think Ill do it ahaha, very hard as it cant be done... So in your evaluation you have to make sure you explain that the certain policy (supply side) may still cause inflation in the long run
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    COMMON MISTAKE
    Fall in inflation from 5% to 1% e.g. is not DEFLATION - IT IS DISINFLATION. Inflation at a slower-rate than original.
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    (Original post by englandgirl1997)
    Can someone explain how there can be high employment when inflation is low please!
    The question is basically saying how do you reduce unemployment excluding through the use of interest rates, so basically supply-side policy. Examples of points:
    - Reduction in corporation tax
    - Reduction in NMW
    - Infrastructure projects
    - Grants to small businesses

    Remember that although edexcel attempt to confuse you, the questions usually boil down to these 3 topics:
    Demand Side
    Supply-side
    Macro-conflicts

    So if you end up seeing a question, hopefully not, try relate it to one of these because I've never seen a 30 marker that does not come down to one, or multiple of these 3 topics.
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    when you draw your AS/AD graphs do you draw the As curve slanting upwards (short run) or the long run curve? Silly question but just making sure if they accept either
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    I think immigration could pop up as a 12 marker
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    what can you infer about income inequality when looking at an AD/AS diagram?
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    What's the easiest way to tell quickly if a question is supply-side or demand-side
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    (Original post by Rpat)
    when you draw your AS/AD graphs do you draw the As curve slanting upwards (short run) or the long run curve? Silly question but just making sure if they accept either
    I'd say long run is better, the Keynesian curve, simply because you can make statements about how if the economy is close to full capacity, then an increase in aggregate supply may result in inflation, but both are accepted.
 
 
 
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