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AQA A2 Economics Unit 4 (23rd June 2016) Watch

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    (Original post by thesmallman)
    Ok, so there's actually this huge confusion about what we mean when we say 'interest rate'. What you actually mean is when the central bank lowers BANK RATE' (which is the rate of interest that it charges commercial banks to borrow funds from the central bank/deposit reserves). Note: this is different to the MARKET interest rates which are the returns on bonds/stocks/deposits in financial markets.

    So, back to the argument- some people believe that just by lowering the BANK RATE would not translate into lower MARKET RATES due to a liquidity trap (simply because commercial banks hope to protect their profit margins)--> QE would help to push up asset/bond prices (in the market) DIRECTLY and lower the yield (which is the interest on these assets).

    HOWEVER... the idea of the liquidity trap still applies + hinders channel number (2) that I mentioned above--> i.e. although commercial banks see their reserves increase--> still comparatively unwilling to lower rates further

    So all in one, the simple answer is: QE an additional boost DIRECTLY into the market whereas the bank rate has to go through the whole transmission mechanism + is seen as sort of like a 'last resort' to boosting the economy.

    Hope I didn't confuse you even more ahahah - But tbh at this stage, you're really not expected to know it in that amount of detail!


    Lmao you explain economics better than my teacher 😂🔫no wonder you got full UMS . I thought I was smart
    In economics ... Not until you meet people on the studentroom LOL. Anyway thank you very much !


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    (Original post by Anymorefor123)
    Lmao you explain economics better than my teacher 😂🔫no wonder you got full UMS . I thought I was smart
    In economics ... Not until you meet people on the studentroom LOL. Anyway thank you very much !


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    no problem, I'm gonna do an economics degree (hopefully) at uni so am always reading around my subject haha
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    (Original post by thesmallman)
    no problem, I'm gonna do an economics degree (hopefully) at uni so am always reading around my subject haha

    Oh explains why haha ! Good luck anyway !

    Last q lmao- how can quantitative easing reduce the currency ? ( devalue ) I mean ?


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    (Original post by Anymorefor123)
    Oh explains why haha ! Good luck anyway !

    Last q lmao- how can quantitative easing reduce the currency ? ( devalue ) I mean ?


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    Please see my first post (channel no.3)
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    "Assess the importance of a floating exchange rate to a country trying to achievemacroeconomic stability." (25 marker) - June 2014 - anyone know how to structure an essay to this??
    Thanks
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    We can talk about both micro and micro economics in both econ3 and econ4 right???
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    The current account supposedly reflects our economy's international competitiveness...Outward profit flows are added onto imports as a negative in the current accountBut outward profit flows are generated from FDI - and FDI reflects comparative advantage in our country, thus so does outward profit flows?So does that mean current account underestimates our competitiveness? And does that mean FDI can also be seen as a negative thing?
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    no gurantee about brexit guys...these papers are written like a year or two before we do them...
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    (Original post by scrawlx101)
    no gurantee about brexit guys...these papers are written like a year or two before we do them...
    What do you reckon is going to come up ?


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    Honestly I think the referendum will come up because it came up 2014, but not in the exact context and bluntness of the referendum. But, I think it'll have a twist like to what extent will the UK economy's supply side be affected by the EU referendum?

    Also a likely global context is China's economic slowdown. It has been going on for years. It has huge impacts on the UK economy as well as the global economy. Therefore there's loads to talk about making it very good as a context question.
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    (Original post by Anymorefor123)
    What do you reckon is going to come up ?


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    For Micro I think maybe the Royal Mail. For Macro maybe China?

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    any predictions?

    & any essay questions for ECON4 we should know/learn in order to pass?
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    (Original post by Nicole_Streakyy)
    any predictions?

    & any essay questions for ECON4 we should know/learn in order to pass?
    "Honestly I think the referendum will come up because it came up 2014, but not in the exact context and bluntness of the referendum. But, I think it'll have a twist like to what extent will the UK economy's supply side be affected by the EU referendum?

    Also a likely global context is China's economic slowdown. It has been going on for years. It has huge impacts on the UK economy as well as the global economy. Therefore there's loads to talk about making it very good as a context question."

    I said this before.
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    How would you structure both essays ?

    Sorry for all the questions 🙈
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    (Original post by LShaha)
    Honestly I think the referendum will come up because it came up 2014, but not in the exact context and bluntness of the referendum. But, I think it'll have a twist like to what extent will the UK economy's supply side be affected by the EU referendum?

    Also a likely global context is China's economic slowdown. It has been going on for years. It has huge impacts on the UK economy as well as the global economy. Therefore there's loads to talk about making it very good as a context question.

    sry for sounding stupid but what would you talk about for China?
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    Do we have a unit 3 thread too?
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    Points to consider when evaluating
    #equity Vs equality
    #long term Vs shorterm
    #is it feasible
    # quantity or size of change
    # what isthe best argument and why
    #Current events - high national debt - AAA credit rating under threat according to the S&P
    #efficiency
    Etc hereis just a few
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    Plus you guy might already know this but the UK doesnt set its on tarrifs the EU does via CET -common external tarrif

    Correct me if im wrong
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    (Original post by wania98)
    Plus you guy might already know this but the UK doesnt set its on tarrifs the EU does via CET -common external tarrif

    Correct me if im wrong
    Lol. It's a single market. You're right
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    (Original post by lunaa.lovegood)
    sry for sounding stupid but what would you talk about for China?
    Well China has a huge impact on the global economy, due to its sheer size of economy.

    It's slowing down as it is reaching the stage of technology which other modern economies are already at now, the in-flow of capital is slowing down due to changes in labour skills and what sectors they are working in. As a result, there's limited room for China to grow at the rate it has for so long, therefore slowing down.

    If China's economy slows down, it will affect its ASEAN trade bloc, which in turn with them as tiger economies, which are linked to several other trade blocs, may therefore affect trade in one way or another through globalisation. You could say the slowdown can cause a negative global multiplier effect through the reduction in China's demand for imports, affecting other countries' demand for exports.

    For the UK economy, there's loads you can talk about:
    Lower Export Demand:
    • Reduced Chinese demand for exports reduces demand for UK exports. Could affect AD and reduce economic growth.
    • But China only makes up a small percentage of UK exports, but as a component of total UK AD, exports to China are significant
    • Predictions on export growth were largely made off the predictions for China's growth.
    Less Chinesestudents:
    • International students provide the UK with large sums of money as they pay more than the UK citizen. (Accounts as an export) => lower AD.
    Trade Deficit:
    • The UK already has a large trade deficit with China. The slowdown will make this worse.
    Confidence:
    • The slowdown, even having a small percentage of exports, will lead to lower consumer and business confidence => postponing of investments => lower economic growth.
    • Larger losses for UK banks due to their exposure in Asia. = The comparative advantage falling, contributing to lower export and economic growth.
    Commodities:
    • Less demand for commodities from China will lead to lower commodity prices, such as that for oil and iron. As a result, the UK will benefit from these lower prices as these aren't major exports for the UK economy.
    Lower Inflation:
    • UK already has lower inflation, and due to falling commodity prices as well as possibly Chinese produced goods prices falling => further reduction in inflation rate. Bad and good [Deflation vs Inflation argument]
 
 
 
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