Economics, Accounting & Business: Post your doubts here!

[Esme]

Discuss whether a government should operate a fixed exchange rate system.

The points against fixed exchange rate include : Against this is the need to keep large currency reserves, the need to introduce deflationary
policies which may harm other economic aims, the tendency to maintain an overvalued rate
and the limits on using monetary policy. Fixed rates have become less common because of
the lack of an automatic adjustment and the move to a more robust market system.
^ as in the mark scheme.

1why would there be a need to introduce deflationary policies. and why would monetary policy have to be used ?

 

[Esme]

Discuss why certain goods and services are usually supplied directly by the
government rather than through the market.
For understanding the nature and a discussion of public goods
For understanding the nature and a discussion of merit goods
For understanding the nature and a discussion of other cases
what other cases would we have to discuss.

 

[mimiswift]

May/june 2010-P12
Qns 6-Worldwide, the film industry has increased its expenditure to over $1 billion each year on
successful anti-piracy measures which it finances by charges on DVD products.
How would this be shown in a demand and supply diagram of the market for legally produced
DVDs?
demand curve supply curve
A shifts left shifts left
B shifts left shifts right
C shifts right shifts left
D shifts right shifts right
why does supply curve shift to the left?

Qns 11-http://www.xtremepapers.com/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_s10_qp_12.pdf
it has a diagram....so i gave the link!
how do we get 3000?

May/june 2011-P11
http://www.xtremepapers.com/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_s11_qp_11.pdf
(im really sorry....but i cant write the question down because i'm really busy)

Qns1-The opportunity costs are constant in both economies........what does this line mean?

qns 7 -Which diagrams represent ‘a change in the quantity demanded’?
how can we tell this?

qns 19- i calculated opp cost for this one and i got D but it was C?

can anyone tell me how?

Oct/Nov 2002-
Qns.22- What is likely to improve the visible trade balance of Mauritius but to worsen its invisible balance?
A A Mauritian company sets up a subsidiary company in France.
B A US company builds a factory in the Mauritius to serve the African market.
C The Mauritian government removes import controls on semi-manufactured goods.
D The Mauritian government increases interest rates with a view to strengthening the exchange
rate of the Mauritian rupee.

Qns 24-The table shows information about a country whose consumers spend their income on three
commodities, P, Q and R.

commodity index of index of consumers’
prices in prices in expenditure
year 1 year 2 in year 1
P 100 160 $100 million
Q 100 80 $300 million
R 100 100 $100 million

Between year 1 and year 2 how has the general level of prices changed?
A It has risen by 40%.
B It has risen by 10%.
C It has remained the same.
D It has fallen by 5%.
how to calculate?

O/n 2005
Qns 18-
http://www.xtremepapers.com/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_w05_qp_1.pdf
I taught it's D.....why isn't it D?

Oct/nov 2003
Qns 25-http://www.xtremepapers.com/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_w03_qp_1.pdf
how to calculate it?

??

qns.9 how to find it?

qns 28- why isn't it A???.....B is right i get it...but A is right too?

Oct/nov 2004
http://www.xtremepapers.com/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_w04_qp_1.pdf
Qns 13-why is it B?

qns 25-why is it not C?how is it D?

P12 o/n 2010-
http://www.xtremepapers.com/CIE/International%20A%20And%20AS%20Level/9708%20-%20Economics/9708_w10_qp_12.pdf
qns.22--- how to calculate?
qns 25- how do we figure the answer?

 

[abcde]

Can anyone please explain the reason Q27 has D as the correct answer (and not C)?
http://www.xtremepapers.com/papers/... AS Level/Economics (9708)/9708_w11_qp_12.pdf

 

[burningfire]

Can anyone please explain the reason Q27 has D as the correct answer (and not C)?
http://www.xtremepapers.com/papers/CIE/Cambridge International A and AS Level/Economics (9708)/9708_w11_qp_12.pdf

Hm, well, D mentions the assets, it includes all the tangible ones and intangible ones, whereas C only refers to reserves, and the question also mentions "must be the necessary result of .... " Current accounts consists of Trade in goods, trade in services, income and current transfers.
the question mentions the surplus on the current account, that might be due to enough surplus on any other account enough to cover up the deficit on some other account in current account. therefore, stating C would imply that the the surplus was in current transfers and income, which we are not sure of, as the question doesn't state anything related to that, therefore that leaves us with D, that has to be true. doesn't matter where that surplus came from in the current account, D mentions that an increase in teh NET holding of foreign assets, both tangible and intangible.
Hope that helps

 

[sweetiepie]

http://www.xtremepapers.com/community/threads/compiled-notes-of-commerce-olevel-and-alevel.14128/ hoope this helps evryone

 

[abcde]

Hm, well, D mentions the assets, it includes all the tangible ones and intangible ones, whereas C only refers to reserves, and the question also mentions "must be the necessary result of .... " Current accounts consists of Trade in goods, trade in services, income and current transfers.
the question mentions the surplus on the current account, that might be due to enough surplus on any other account enough to cover up the deficit on some other account in current account. therefore, stating C would imply that the the surplus was in current transfers and income, which we are not sure of, as the question doesn't state anything related to that, therefore that leaves us with D, that has to be true. doesn't matter where that surplus came from in the current account, D mentions that an increase in teh NET holding of foreign assets, both tangible and intangible.
Hope that helps

Thank you. However, don't foreign exchange reserves pile up when export earnings from goods and services exceed import expenditure from them? Why not? (How come C implies a surplus 'in only current transfers and income'?)

 

[mimiswift]

can someone solve my doubts pls

 

[mrgreedywolf]

can someone solve my doubts pls

To MIMISWIFT


May/june 2010-P12 Q6

The demand curve would shift towards the right as the alternative source has been eliminated/reduced
(successful anti-piracy measures (to reduce torrents, which can se said as a substitute in this case))

The supply curve would be shifting to the left because its cost have rose due to (huge) expenditure on anti-piracy measure.
cost is a determinant of supply curve.

Qns 11

(5-3)*1000 + (5-3)*(2000-1000)/2
2*1000 + 2*1000/2
2000+1000
3000

we have to just find out the area of the square and the triangle that represents the change in consumer surplus.

May/june 2011-P11

q1

It is related to Production possibility curve, it is a rule or whatsoever that if the ppc curve is straight then the opportunity cost is same,
where as if the curve had been concave then the opportunity cost would be increasing.

Since both the curves are straight , both have same have constant opportunity cost.

Q7

the question states that which represents A CHANGE IN QUANTITY DEMANDED (note the keywords), not a shift in the curve to either the left or
the right, a change in quantity demanded will always be on the the same demand curve, it will not shift it, it is mostly due to change in price.

Q19

i have given the answer to this mcq with reasonings, try to go back a few pages (might be on the previous page) you will find it.
edit :- http://www.xtremepapers.com/communi...-business-post-your-doubts-here.10459/page-11 (in between the page)

Oct/Nov 2002-
q22

The USA builds a company in Mauritius to serve the whole African market

this will increase the exports of Mauritius , thus an improvement in visible trade
But since the company belongs to USA it will be taking out its profit from Mauritius to USA, profits are invisible.


Q24

First of we have to find its weights, this may be done by seeing the ratios of cash being spent
100:300:100
1:3:1
the total is 1+3+1 = 5

so now to calculate the change
we will simply multiply the new indexes with its weight

160*1 + 80*3 + 100*1 = 500

Now divide it by the sum of weights 500/5 = 100
In year one the index was 100 and in year it has remained at 100 so there is no change.
O/n 2005
Qns 18-
The ancient people thought the world was flat, but it wasn't.

The demand curve has unitary elasticity therefore what so ever the supply be the revenue to the farmer would remain same, so option A is correct.

P.S the first time I did this question(not today), I too choose option D.


Oct/nov 2003
Qns 25

same formula as mentioned above

new index * weight + new *weight .......... / sum of weight

300*4 + 140*3 + 80*3 =1860

1860/(4+3+3) = 1860/10 = 186 <= this is the new weight

new - base
186 -100 = 86 % is the change.


Q.9

first of all identify the equilibrium (where QD = QS) quantity at the price before tax , which is 340 (at price 16)
now find the equilibrium after tax, which is again 340 but at price 19,

find the difference between equilibrium prices before and after tax and you will find the amount of tax. 19-16 = 3 .


Q28.

Due to increase in the interest rate the demand for pound will rise as more people would be willing to invest in UK, therefore they must purchase pounds, this would shift the demand curve to the right .

Since the UK interest rates are high people in UK would prefer to invest in their own country then any other, they would therefore deposit cash in the banks, thus there will be saving and fewer consumption, fewer consumption also means fewer imports, therefore less supply of pound since people aren't demanding many foreign goods so they will be selling fewer pounds, this will shift the supply curve to the left.
Also option A is the result not the cause.


Oct/nov 2004

q13

As the price of a substitute increases the demand for our product will rise ( positive cross elasticity ) (also it is a factor of demand curve shifts)
And as the situation is competitive the firm will also raise its own prices (competition based pricing) (so that consumers may not think that the firms product is of lower quality)


Q25

Option A ; can not be calculated with the provided formula so it will be ignored
option B ; Inflation fell in 2000
option C ; no it was not 4% (it was 2% = (204-200)/200*100)
option D ; yes there was inflation in all of the years


P12 o/n 2010
Q22

first find their ratios


...................................Wheat : Rice
Country X ........................300 : 900.............simplify........1 : 3
country Y.......................... 50 : 100..............simplify.......1 : 2

anything in between this ratio is tradable
you may aswell do this = > 3+2 = 5 divide by 2 and you will get 2.5 (for wheat it will remain 1 => (1+1)/2 = 1 )
so 2.5 rice for 1 wheat.


Note : This was really exhausting .

 

[student92]

as salam alikum​

http://www.xtremepapers.com/CIE/International A And AS Level/9708 - Economics/9708_w10_qp_13.pdf
q 23
as economics p1 on2010

correct answer is c
thankyou​

mrgreedywolf

a little help of yours needed here as well​

 

[mrgreedywolf]

N

as salam alikum​

http://www.xtremepapers.com/CIE/International A And AS Level/9708 - Economics/9708_w10_qp_13.pdf​

q 23​

as economics p1 on2010​

​

correct answer is c​

thankyou​

mrgreedywolf​

​

a little help of yours needed here as well​

Waalikum Assalam.

Not sure about this one but here goes nothing

The list contains some of the items, NOT ALL.

So the average of these make up = > 9+4.7+4+3.2+2.9 = 23.8

the average = 23.8/5 = 4.76

The overall CPI rose by 2.5 % , this means that other increases were less then then 2.5

for example add two more items such as electronics (decrease by 8%)(can be negative), clothings (increase by 1.7%) the new CPI
would be = 9+4.7+3.2+4+2.9-8+1.7 = 17.5

17.5/7 = 2.5 %

Therefore the other average price changes were less then 2.5 ( as in example -8 and +1.7)

I might be wrong on the decrease thing but if more examples are added keeping their changes less then 2.5 the example would still be correct .

Hope this helps

 

[student92]

N

Waalikum Assalam.

Not sure about this one but here goes nothing

The list contains some of the items, NOT ALL.

So the average of these make up = > 9+4.7+4+3.2+2.9 = 23.8

the average = 23.8/5 = 4.76

The overall CPI rose by 2.5 % , this means that other increases were less then then 2.5

for example add two more items such as electronics (decrease by 8%)(can be negative), clothings (increase by 1.7%) the new CPI
would be = 9+4.7+3.2+4+2.9-8+1.7 = 17.5

17.5/7 = 2.5 %

Therefore the other average price changes were less then 2.5 ( as in example -8 and +1.7)

I might be wrong on the decrease thing but if more examples are added keeping their changes less then 2.5 the example would still be correct .

Hope this helps

thankyou

 

[zainab856]

Which is a normative economic statement?
A Money is the least liquid form of wealth.
B Some firms are subsidised by the government.
C Some workers earn more than others.
D Taxes are the best way to discourage smoking.
why isint a also a normative statment
correct answer is d

A is int a normative statement because you can prove it... you can prove that money is the least liquid form of wealth, so therefore it is a positive statement..

 

[zainab856]

N

Waalikum Assalam.

Not sure about this one but here goes nothing

The list contains some of the items, NOT ALL.

So the average of these make up = > 9+4.7+4+3.2+2.9 = 23.8

the average = 23.8/5 = 4.76

The overall CPI rose by 2.5 % , this means that other increases were less then then 2.5

for example add two more items such as electronics (decrease by 8%)(can be negative), clothings (increase by 1.7%) the new CPI
would be = 9+4.7+3.2+4+2.9-8+1.7 = 17.5

17.5/7 = 2.5 %

Therefore the other average price changes were less then 2.5 ( as in example -8 and +1.7)

I might be wrong on the decrease thing but if more examples are added keeping their changes less then 2.5 the example would still be correct .

Hope this helps

i may be wrong but i dont think any calculation is needed here, the question states that "The increase in the overall CPI over the same period was 2.5 %." so basically thats the increase, of the products, the prices of the product cant be more than that.. HOPE this helped..​

 

[Paradoxical]

I'm having a little bit of trouble with the question 'Explain the effect of the removal of an indirect tax on the market for a product' (O/N 2003 Q3a). The mark scheme mentions two points: 'explanation of the broad market effect' and 'explanation of the detailed market effect'. For the broad market, I think I should be writing about how the removal of the tax acts in the same way as a decrease in costs and so more is produced at a lower price. But I'm not too sure what I should write about the detailed effect. Anyone have any ideas?

 

[00mfr]

in w11 paper 2 - question 1
discount allowed has been added to sales and in expenses
in s08 paper 2 - question 1
discount allowed only added to expenses
answer appreciated

 

[mimiswift]

To MIMISWIFT


May/june 2010-P12 Q6

The demand curve would shift towards the right as the alternative source has been eliminated/reduced
(successful anti-piracy measures (to reduce torrents, which can se said as a substitute in this case))

The supply curve would be shifting to the left because its cost have rose due to (huge) expenditure on anti-piracy measure.
cost is a determinant of supply curve.

Qns 11

(5-3)*1000 + (5-3)*(2000-1000)/2
2*1000 + 2*1000/2
2000+1000
3000

we have to just find out the area of the square and the triangle that represents the change in consumer surplus.

May/june 2011-P11

q1

It is related to Production possibility curve, it is a rule or whatsoever that if the ppc curve is straight then the opportunity cost is same,
where as if the curve had been concave then the opportunity cost would be increasing.

Since both the curves are straight , both have same have constant opportunity cost.

Q7

the question states that which represents A CHANGE IN QUANTITY DEMANDED (note the keywords), not a shift in the curve to either the left or
the right, a change in quantity demanded will always be on the the same demand curve, it will not shift it, it is mostly due to change in price.

Q19

i have given the answer to this mcq with reasonings, try to go back a few pages (might be on the previous page) you will find it.
edit :- http://www.xtremepapers.com/communi...-business-post-your-doubts-here.10459/page-11 (in between the page)

Oct/Nov 2002-
q22

The USA builds a company in Mauritius to serve the whole African market

this will increase the exports of Mauritius , thus an improvement in visible trade
But since the company belongs to USA it will be taking out its profit from Mauritius to USA, profits are invisible.


Q24

First of we have to find its weights, this may be done by seeing the ratios of cash being spent
100:300:100
1:3:1
the total is 1+3+1 = 5

so now to calculate the change
we will simply multiply the new indexes with its weight

160*1 + 80*3 + 100*1 = 500

Now divide it by the sum of weights 500/5 = 100
In year one the index was 100 and in year it has remained at 100 so there is no change.
O/n 2005
Qns 18-
The ancient people thought the world was flat, but it wasn't.

The demand curve has unitary elasticity therefore what so ever the supply be the revenue to the farmer would remain same, so option A is correct.

P.S the first time I did this question(not today), I too choose option D.


Oct/nov 2003
Qns 25

same formula as mentioned above

new index * weight + new *weight .......... / sum of weight

300*4 + 140*3 + 80*3 =1860

1860/(4+3+3) = 1860/10 = 186 <= this is the new weight

new - base
186 -100 = 86 % is the change.


Q.9

first of all identify the equilibrium (where QD = QS) quantity at the price before tax , which is 340 (at price 16)
now find the equilibrium after tax, which is again 340 but at price 19,

find the difference between equilibrium prices before and after tax and you will find the amount of tax. 19-16 = 3 .


Q28.

Due to increase in the interest rate the demand for pound will rise as more people would be willing to invest in UK, therefore they must purchase pounds, this would shift the demand curve to the right .

Since the UK interest rates are high people in UK would prefer to invest in their own country then any other, they would therefore deposit cash in the banks, thus there will be saving and fewer consumption, fewer consumption also means fewer imports, therefore less supply of pound since people aren't demanding many foreign goods so they will be selling fewer pounds, this will shift the supply curve to the left.
Also option A is the result not the cause.


Oct/nov 2004

q13

As the price of a substitute increases the demand for our product will rise ( positive cross elasticity ) (also it is a factor of demand curve shifts)
And as the situation is competitive the firm will also raise its own prices (competition based pricing) (so that consumers may not think that the firms product is of lower quality)


Q25

Option A ; can not be calculated with the provided formula so it will be ignored
option B ; Inflation fell in 2000
option C ; no it was not 4% (it was 2% = (204-200)/200*100)
option D ; yes there was inflation in all of the years


P12 o/n 2010
Q22

first find their ratios


...................................Wheat : Rice
Country X ........................300 : 900.............simplify........1 : 3
country Y.......................... 50 : 100..............simplify.......1 : 2

anything in between this ratio is tradable
you may aswell do this = > 3+2 = 5 divide by 2 and you will get 2.5 (for wheat it will remain 1 => (1+1)/2 = 1 )
so 2.5 rice for 1 wheat.


Note : This was really exhausting .

Thanks alot lot lot lot
I was so tensed that my doubts wont be solved because of it being so much!

 

[mimiswift]

I'm having a little bit of trouble with the question 'Explain the effect of the removal of an indirect tax on the market for a product' (O/N 2003 Q3a). The mark scheme mentions two points: 'explanation of the broad market effect' and 'explanation of the detailed market effect'. For the broad market, I think I should be writing about how the removal of the tax acts in the same way as a decrease in costs and so more is produced at a lower price. But I'm not too sure what I should write about the detailed effect. Anyone have any ideas?

actually its is explanation of detailed effect not detailed market effect!
starting with explanation of an indirect tax then move on to how it will increase supply and reduce costs to individual firms........then talk about the market for the product.....how all other firms will also gain from the same benefit of lower prices......dont forget elasticities aswell....a diagram too!....market will get more competitive....expenditure on promoting their products will rise.....i guess you can write stuff like that!
really sorry but i aswell am very bad at writing!

 

[mimiswift]

in w11 paper 2 - question 1
discount allowed has been added to sales and in expenses
in s08 paper 2 - question 1
discount allowed only added to expenses
answer appreciated

I s08 PAPER the sale value that was given already included the discount.....whereas the paper in w11 bits were given and we had to find the whole value of sales!

did'ya get what i said?

 

[student92]

Discuss whether a government should operate a fixed exchange rate system.

The points against fixed exchange rate include : Against this is the need to keep large currency reserves, the need to introduce deflationary
policies which may harm other economic aims, the tendency to maintain an overvalued rate
and the limits on using monetary policy. Fixed rates have become less common because of
the lack of an automatic adjustment and the move to a more robust market system.
^ as in the mark scheme.

1why would there be a need to introduce deflationary policies. and why would monetary policy have to be used ?

monetary policy refers to the changes in interest rates the central government or respective authority does, this can be used to stimulate growth in an economy or to reduce aggregate demand, so that inflation can be controlled. for instance, lower interest rates mean more borrowing by consumers and businesses to carry out expansion or consume expensive goods etc, raising the AD.
this is one use of monetary policy, the other use is, that changes in it can stimulate and or reduce demand for a countries currency.
if uk government increases its interest rate, the GBP would register an increase in its demand, as more foreign investors will put their money in British banks so they can earn higher interest on them.
conversely, when the government reduced interest rates, uk investors will shift their money to other bank in foreign countries in search of a higher interst rate, causing a fal in the exchange rate of thier GBP, as the supply of GBP in the foreign exchange would increase as uk people change their GBP to other currencies.
so, monetary policy can be used to maintain the exchange rate of a currency within the specific, pre set band.
in context of the question, you have to argue that a higher interst rate would have to be chosen in order to appreciate the value of the currency, however, local business and consumers would have to suffer, as the cost of bowrowing would increase and they are unlikely to borrow, reducing AD in the economy, which can in serious cases, lead to deflation.