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    ok what are the functions of the world trade organisation? and why are countries so keen to join? and how does a new member effect exisiting members?
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    (Original post by Fly By)
    ok what are the functions of the world trade organisation? and why are countries so keen to join? and how does a new member effect exisiting members?
    Well i dont know much about it but heres a try! :eek:
    its an organisation that seeks to promote free trade between all countries in the world. all countries are keen to join coz free trade is the one way to go when ur lookin for economic growth etc, its beneficial for a country
    well if a new member joins it creates more competition to the other members, this is good in a way as the old members can become more efficient in finding ways to produce goods and services at a lower cost!
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    (Original post by kriztinae)
    well each country likes to keep foreign currency reserves, im guessin ur askin why they keep them!
    well instead of using interest rates to alter the value of ur currency, u can use foreign currency reserves, i.e if ur currency is going down u can sell foreign currency and buy up more of ur currency to appreciate its value,( in the same time u can affect the value of the other countrys curency!)
    also when ur curency is appreciating too much u can sell off ur currency and buy up other countrys currency for a time of need!
    Is that seen as an international policy?

    You're in a recession and output exceeds demand, so you sell some of your currency, depreciate it's value, which will make your buisness's exports cheaper and imports more expensive, raising demand and bringing you out of the recession...
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    (Original post by mik1a)
    Is that seen as an international policy?

    You're in a recession and output exceeds demand, so you sell some of your currency, depreciate it's value, which will make your buisness's exports cheaper and imports more expensive, raising demand and bringing you out of the recession...
    that could definitely work i never thought of it that way! but thts just in theory, in practice hardly anything works
    as for an international policy i dont know
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    Your statement about interest rates rising increases the value of money is true to an extent. However, a better thing to say would be that this rise in interest rates increases the MPS (marginal propensity to save), which reduces consumption. This will lower aggregate demand in the UK. As such, the British public will import less goods as demand in general is lower. UK Firms will export more, as there is not enough demand in the UK. This will in turn cause the balance of payments to shift towards a surplus, which could in turn cause a rise in demand due to

    AD=C+I+G+(X-M), although that is going one step too far for the purposes of this question.

    I think that you are referring to an increase in interest rates in the UK leading to other countries investing money in UK bank accounts etc ("Hot Money"). This causes the exchange rate to rise and the pound to be worth more, making imports cheaper and exports more expensive.

    I have no idea which scenario is more likely - what do you think? Would an examiner allow you to look at it in either way?

    Tom
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    (Original post by tomlegge)
    Your statement about interest rates rising increases the value of money is true to an extent. However, a better thing to say would be that this rise in interest rates increases the MPS (marginal propensity to save), which reduces consumption. This will lower aggregate demand in the UK. As such, the British public will import less goods as demand in general is lower. UK Firms will export more, as there is not enough demand in the UK. This will in turn cause the balance of payments to shift towards a surplus, which could in turn cause a rise in demand due to

    AD=C+I+G+(X-M), although that is going one step too far for the purposes of this question.

    I think that you are referring to an increase in interest rates in the UK leading to other countries investing money in UK bank accounts etc ("Hot Money"). This causes the exchange rate to rise and the pound to be worth more, making imports cheaper and exports more expensive.

    I have no idea which scenario is more likely - what do you think? Would an examiner allow you to look at it in either way?

    Tom
    i would say neither are more likely, depends on the people and the government, nd if u have a chance to say both then do so, in the case of an exam the examiner wants to know u cal look both ways and state everything possible! i would state both
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    (Original post by kriztinae)
    ok wait ur question doesnt make sence but maybe this helps
    if u increase interest rates it will increase the value of ur currency as more people are demanding ur currency but this makes imports for ur cutizens cheaper but ur exports will be more expensive for other countries, this creating a balance of payment defecit
    Increasing interest rates means the cost of borrowing rises and the return to saving rises. Therefore people save more resulting in a fall in imports with exports remaining unaffected. If anything this will result in an improving balence of payments position.
    I think you are describing exchange rates?
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    (Original post by Economist)
    Increasing interest rates means the cost of borrowing rises and the return to saving rises. Therefore people save more resulting in a fall in imports with exports remaining unaffected. If anything this will result in an improving balence of payments position.
    I think you are describing exchange rates?
    that works but no i did mean interest rates... if u increase interest rates, more people will demand ur currency to save their money in ur countrys bank, thus appreciating the curency that way
    rite?
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    (Original post by kriztinae)
    that works but no i did mean interest rates... if u increase interest rates, more people will demand ur currency to save their money in ur countrys bank, thus appreciating the curency that way
    rite?
    True, you described the effects of interest rates on the exchange rates and then the effects of that. Personally I would comment on imports falling if it was a short answer but if it was an essay I may comment on both as it is a good discussion point :rolleyes:
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    (Original post by Economist)
    True, you described the effects of interest rates on the exchange rates and then the effects of that. Personally I would comment on imports falling if it was a short answer but if it was an essay I may comment on both as it is a good discussion point :rolleyes:
    yeah defnitely in an essay comment on everything u can!
    say everything u can, what happens in theory nd then what happens in practice, often they are both very different
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    I was worried I had put my foot in it there. Pleased to see that I am ok by the looks of things - may I ask all of you your predicted grades for Economics AS? Are you doing Edexcel 14th June? It is the only subjected I have been predicted an A in :-(

    Tom
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    How do firms respond to interest rates? I know this is the marginal efficiency of capital theory, and we are taught they are inversely proportional - that is higher interest rates will draw company money into banks due to higher returns.

    But I read in a book that as interest rates rise, consumption falls as the marginal propensity to save rises, so more money going into banks from consumers will give banks more money and give more loans to companies at lower rates - after all, once banks have more money from consumers, they have to do something useful with it or they are wasting money.
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    (Original post by tomlegge)
    I was worried I had put my foot in it there. Pleased to see that I am ok by the looks of things - may I ask all of you your predicted grades for Economics AS? Are you doing Edexcel 14th June? It is the only subjected I have been predicted an A in :-(

    Tom
    well thats good!
    i did economics AS and got a D, retook it and got an A, i was in heaven i swear! iv got my economics A level exam tomorrow argg. im predicted at least a C a B would be nice!
    im not doing edexcel tho im doing CIE crappy exams that people in england dont do!
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    (Original post by tomlegge)
    I was worried I had put my foot in it there. Pleased to see that I am ok by the looks of things - may I ask all of you your predicted grades for Economics AS? Are you doing Edexcel 14th June? It is the only subjected I have been predicted an A in :-(

    Tom
    I'm doing Edexcel Economics, but I thought it was on the 15th?
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    (Original post by mik1a)
    How do firms respond to interest rates? I know this is the marginal efficiency of capital theory, and we are taught they are inversely proportional - that is higher interest rates will draw company money into banks due to higher returns.

    But I read in a book that as interest rates rise, consumption falls as the marginal propensity to save rises, so more money going into banks from consumers will give banks more money and give more loans to companies at lower rates - after all, once banks have more money from consumers, they have to do something useful with it or they are wasting money.
    firms also tend to save in times when there are high interest, becoz the mps increases. they invest less and stuff
    governments tend to increase interet rates in time of high inflation to cut down demand, thus decreasing the rate of inflation.
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    oops may have the date wrong then!!!!

    15th 14th it dont matter - long way off yet, especially as ive already finished german, french and english lang!!!!

    Tom
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    (Original post by tomlegge)
    oops may have the date wrong then!!!!

    15th 14th it dont matter - long way off yet, especially as ive already finished german, french and english lang!!!!

    Tom
    Yay I've finished German too! What exam board were you with? I've got Geog next mon and Bio on the tues
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    just checked - edexcel economics as is on the 14th june!!
    i was right i was right etc etc !!!

    Tom
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    german was edexcel, as was french - i thought the german exam was ok - the papers were difficult but they followed usual format at least - the french papers (particulary the true / false (correct it) and the essay question)

    Tom
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    (Original post by tomlegge)
    just checked - edexcel economics as is on the 14th june!!
    i was right i was right etc etc !!!

    Tom
    Really?! I could have sworn the 15th. Oh well. I did AQA for German, found it pretty touch but oh well, tis over now.
 
 
 
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