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    (Original post by physicsamor)
    Guys I talked about currency manipulation as a policy to correct a current account deficit but I wrote the wrong definition >.> I said when a country sells reserves of its own currency but I think it's foreign currency they sell. But my whole explanation was correct. Do you think it'll make that particular point look weaker now?
    No thats the correct definition for a currency devaluation. You are using domestic currency reserves to buy up foreign currency reserves, thus increasing the supply of pounds on forex markets and leading a depreciation in the exchange rate. If you used that chain of reasoning you were correct to do so.
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    (Original post by himynameiskieran)
    Fair enough my dude, to show deflation you need the AD curve too, with LRAS shifting right the price level falls
    You have to distinguish between benign and malign deflation, i.e. is it caused by a stronger supply side or lagging demand side. In japan it has been a combination. After their asset bubble burst 20 years ago demand has continually lagged due to lack of confidence and a failure of the banks to reallocate savings to use for investment. However, this has lead to an even bigger issue which is low inflation expectations and a loss of credibility of the central bank. Workers no longer believe the central banks inflation target and thus they fail to bargain for higher wages, keeping the SRAS low. Lagging demand from consumers has lead to falling investment from firms which in turn has reduced demand for labour further suppressing wages. The 'equilibrium interest rate', a hypothetical real interest rate which is supposed to equate I=S, is so low that it is unattainable due to the zero lower bound. Deflation has exacerbated this issue by raising real interest rates. The result is a liquidity trap with excess savings. These excess funds can then be used by the government in fiscal policy without a crowding out effect as they are not competing with the private sector as the private sector is not investing them anyway. The central bank has to be more bold, potentially raising the inflation target to try regain credibility, but even this may not work due to low inflation expectations. Paul Krugman famously said that the BoJ need to "credibly promise to be irresponsible" in an attempt to 'prim the pump'.

    There are many other factors too such as high household and national debt, an ageing population and a lack of competition in markets. But ultimately it is time for a wage rise, a large scale devaluation for the Yen is one such bold measure they could use to try breakaway from this state of 'secular stagnation'.
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    (Original post by Gemmamcconville)
    If financial markets came up on paper 3 what sort of questions might they ask? Don't see how it could link to micro.... Thanks for any comments
    There is so much micro to link.

    Start with possible market failures:

    Asymmetric information- this can lead to moral hazard as only the bankers realise the full extent of the risk involved in a transaction (e.g. originating a sub-prime mortgage) but their incentives are such that they take excessive risk and overproduce certain risky financial products as they stand to gain from this increase in output via commissions but they are not liable to the costs. Moral hazard can also occur in insurance markets. Asymmetric information may also lead to exploitation by a financial institution, selling consumers products that they don't really need but making them believe that they do (e.g. PPI). Thirdly, asymmetric info may cause adverse selection which has quite a long explanation but can lead to rising prices of insurance premiums. Finally, the asymmetry of information between owners and managers can allow excessive risk to build up.

    Regulation: improve information standards, scrutiny by the PRA of riskiness of bank assets, make originators and bankers liable to the success of the products they sell

    Negative externalities: cost for the taxpayer of bank failure, loss of savings after bank failure, loss of income and lower living standards if the financial crisis leads a wider economic crisis in the real economy.

    Regulation:raise capital/leverage ratios to prevent bank failure, raise liquidity ratios to prevent a bank run, provide emergency liquidity to prevent a credit crunch, insure deposits, nationalisation of the banks

    Monopoly pricing - money markets are dominated by oligopolists, the large commercial banks, therefore they can exploit their power through collusion as was seen during the rigging of LIBOR.

    Regulation:FCA impose a price ceiling or heavy fine offenders or break up commercial banks or improve contestability

    Lack of equity - high premiums on insurance are regressive, poor are punished the most as they lose their jobs first are most likely to lose their house and have to bail out the banks.

    Speculation and bubbles can also lead to market failure as prices rise far above their intrinsic value leading to a misallocation of resources

    EVALUATION: govt failure - unintended consequences, information problems, cost of oversight and admin, slow the recovery, loss of jobs; should the banks be left to fail? etc....

    Macro aspects are more obvious:

    Credit crunch
    Systemic risk
    Role in reallocating savings
    Monetary policy

    There is plenty there which is why I think it is likely that it will come up.
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    (Original post by hbaig27)
    For the patterns of trade q I said:

    -Trade liberalisation
    -Trading Blocs
    -UKs shift from goods to services
    -Improvements in technology
    -Rise of MNCs

    Are these points valid?
    Yes these are good. I spoke about structural adjustments away from heavy industry to services due to changing comparative advantage. Then I spoke about how a large portion of our trade is with the EU due to trade creation through removing trade barriers. Then I said the decline of north sea oil/gas (had some stats from geography) will mean that we will increase energy imports.
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    (Original post by archie341)
    I also set economics aside and talked about the aging population in Japan and even a declining population meaning there are fewer people in active employment. So i suggested some policies to improve birth rate or supply side policy tax cuts to get people into jobs and restimulate the economy. When it comes down to it they wanted your best evaluation of monetary policy so if you sorted that you can't really go wrong.
    Thats not setting economics aside, demographic factors are one of the governing dynamics of economics.
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    (Original post by GTHargs)
    No thats the correct definition for a currency devaluation. You are using domestic currency reserves to buy up foreign currency reserves, thus increasing the supply of pounds on forex markets and leading a depreciation in the exchange rate. If you used that chain of reasoning you were correct to do so.
    ah okay I think that's what I put phew
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    Didnt Aqa techincally give us a question on Financial Markets as Monetary Policy is a apart of that topic?
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    (Original post by CricketMaster123)
    Didnt Aqa techincally give us a question on Financial Markets as Monetary Policy is a apart of that topic?
    That was focussed on monetary policy not explicitly financial markets
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    How do you work this out?
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    I don't remember being taught how to work out the change in real GDP per capita from base years but this is what i did to work it out, and it makes sense in my head at least xD.I did the rise in GDP/Rise in Population and then divided that by the rise in inflation, then times the answer by 100.

    100% increase in GDP
    20% increase in population
    50% increase in Price Level

    so 100/20 = 55/50 is 0.1
    0.1 *100 = 10%
    I looked at the mark scheme and the answer was correct, and i hope the method is too xP
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    (Original post by GTHargs)
    Thats not setting economics aside, demographic factors are one of the governing dynamics of economics.
    Ye I mean we don't explicitly cover population etc on the econ syllabus but was worth a mention so why not
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    (Original post by GTHargs)
    There is so much micro to link.

    Start with possible market failures:

    Asymmetric information- this can lead to moral hazard as only the bankers realise the full extent of the risk involved in a transaction (e.g. originating a sub-prime mortgage) but their incentives are such that they take excessive risk and overproduce certain risky financial products as they stand to gain from this increase in output via commissions but they are not liable to the costs. Moral hazard can also occur in insurance markets. Asymmetric information may also lead to exploitation by a financial institution, selling consumers products that they don't really need but making them believe that they do (e.g. PPI). Thirdly, asymmetric info may cause adverse selection which has quite a long explanation but can lead to rising prices of insurance premiums. Finally, the asymmetry of information between owners and managers can allow excessive risk to build up.

    Regulation: improve information standards, scrutiny by the PRA of riskiness of bank assets, make originators and bankers liable to the success of the products they sell

    Negative externalities: cost for the taxpayer of bank failure, loss of savings after bank failure, loss of income and lower living standards if the financial crisis leads a wider economic crisis in the real economy.

    Regulation:raise capital/leverage ratios to prevent bank failure, raise liquidity ratios to prevent a bank run, provide emergency liquidity to prevent a credit crunch, insure deposits, nationalisation of the banks

    Monopoly pricing - money markets are dominated by oligopolists, the large commercial banks, therefore they can exploit their power through collusion as was seen during the rigging of LIBOR.

    Regulation:FCA impose a price ceiling or heavy fine offenders or break up commercial banks or improve contestability

    Lack of equity - high premiums on insurance are regressive, poor are punished the most as they lose their jobs first are most likely to lose their house and have to bail out the banks.

    Speculation and bubbles can also lead to market failure as prices rise far above their intrinsic value leading to a misallocation of resources

    EVALUATION: govt failure - unintended consequences, information problems, cost of oversight and admin, slow the recovery, loss of jobs; should the banks be left to fail? etc....

    Macro aspects are more obvious:

    Credit crunch
    Systemic risk
    Role in reallocating savings
    Monetary policy

    There is plenty there which is why I think it is likely that it will come up.
    This really clears things up so thanks! just one thing, I am unsure of how insurance premiums can link into financial markets? I though adverse selection was a problem with private health etc. So what is it to do with banks and the financial market?
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    In my paper 2 exam, I answered the question about unemployment and how a fall in unemployment will clash with other macro-objectives. I spoke about how a fall in unemployment will lead to inflation (SRPC), and then said how this will cause a worsening of the balance of payments because inflation will cause a fall in exports but a surge in imports. Is this correct?
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    How would you work out the weighted index?
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    (Original post by J2671)
    How would you work out the weighted index?
    (%change in price x weight + percentage change in price x weight) / (adding all weights)
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    Paper 3 is gonna ruin me😭😭
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    Why do u say that?
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    Anyways what do u guys think will be on paper 3 I think it will be something which includes micro and macro l.
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    Paper 1 and 2 have already ruined me '
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    (Original post by Akay111)
    Anyways what do u guys think will be on paper 3 I think it will be something which includes micro and macro l.
    Thats what paper 3 is...
 
 
 
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