Economics nov 2007 p2 q1

[raza-rocker]

please help me which points which i write with such type of questions
and if u can give me any diagrams to explain this

 

[raza-rocker]

anyone ??

 

[Xenon]

I'm assuming you need help with part c and d

c) i) the mark allocated for this is just three, so there is no need to waste to much time here... give the basic relation...
---depreciation causes exports to become price competitive and makes the goods cheaper to foreigners, increasing demand
--- imports become expensive and hence there is reduction in demand
--- fall in import expenditure and rise in export earnings causes the current account to move in a favorable position
you can end the answer with a brief evaluation stating the Marshall-Lerner condition

ii) since you have been asked to use the diagrams, in your answer draw reference from it, state the time periods like from 1986 to 1991, a weakening of dollar did move the current account to favorable positions.. the size of the deficits as a % of GDP did fall and at once it actually moved into a surplus... whatever you write draw evidence from the diagram to support your claim

d) the key word here is discuss... so you must give state the adv and disadv of fixing exchange rate.. and at the end give a conclusion, I don't fully remember but 1 mark is also allocated for presenting a conclusion.... you might state that the government should take decision basing on its economic conditions and policies

 

[raza-rocker]

I'm assuming you need help with part c and d

c) i) the mark allocated for this is just three, so there is no need to waste to much time here... give the basic relation...
---depreciation causes exports to become price competitive and makes the goods cheaper to foreigners, increasing demand
--- imports become expensive and hence there is reduction in demand
--- fall in import expenditure and rise in export earnings causes the current account to move in a favorable position
you can end the answer with a brief evaluation stating the Marshall-Lerner condition

ii) since you have been asked to use the diagrams, in your answer draw reference from it, state the time periods like from 1986 to 1991, a weakening of dollar did move the current account to favorable positions.. the size of the deficits as a % of GDP did fall and at once it actually moved into a surplus... whatever you write draw evidence from the diagram to support your claim

d) the key word here is discuss... so you must give state the adv and disadv of fixing exchange rate.. and at the end give a conclusion, I don't fully remember but 1 mark is also allocated for presenting a conclusion.... you might state that the government should take decision basing on its economic conditions and policies

thanks for the ans
plz also tell me how can i relate marshall lerner in c(i)

and which diagram in c(ii) to support my answer

 

[Xenon]

just say that... however depreciation will be successful if the Marshall-Lerner condition is fulfilled, i.e. if the PEDx + PEDm >1

for c(ii), I meant the Fig1 and Fig2 given in the passage. State time periods, maybe also some % values