Improving exam technique and getting the A* in your A2 Economics Exams

Task: Analysis and Evaluation 1.Analysis: Explain why inflation rates may differ between countries. 2.Evaluation: Evaluate the view that low inflation should no longer be the top priority for macroeconomic policy

Building an Essay Answer Crisp & accurate definitions 1 key point per paragraph + Supporting examples / evidence / diagrams +evaluate as you go Evaluative conclusions

Analysis: Explain why inflation rates may differ between countries (15 marks) 20 minutes for this question Start with clear and brief definition of inflation This is a question about causation You may have time to develop (briefly) only three or four points Support with AD/AS analysis Apply with examples / evidence

Definition of inflation Sustained increase in the aggregate or general price level of the economy. Weighted basket of goods and services UK (CPI) target inflation of 2%, +- 1% Quote data from the exam source / extract – easy marks, often missed by students

CPI inflation for selected countries

Annual inflation rates

Explaining differences in inflation Short term causes 1.Strength of growth / “demand-pull” factors 2.Asset price inflation feeding into wealth – domestic demand – prices 3.Changes in commodity prices (e.g. oil, gas and food-stuffs) 4.Changes in the exchange rate (changes in import prices)

Explaining differences in inflation Medium term causes 1.Productivity (affects unit labour costs) 2.Intensity of domestic & external competition 3.Differences in inflation expectations (affects wage demands, NAIRU et al) 4.Credibility/success of monetary and fiscal policies in managing AD / boosting LRAS

Evaluate the view that low inflation should no longer be the number one priority for macroeconomic policy (25 marks) You have around 40 minutes for this evaluation question

Consider using a writing frame in your revision Knowledge Be clear what low inflation means Price stability – low inflation of 1-4% per year Briefly explain why inflation control has been seen as a key macro policy objective –Business confidence and investment spending –Competitiveness and trade performance (X-M) –Avoiding economic/social costs of high inflation –Seen as a pre-condition for achieving other objectives AnalysisPoint 1 Diagram Point 2 Diagram Point 3 Diagram ApplicationApplication to context 1 Application to context 2 Application to context 3 EvaluationEvaluation 1Evaluation 2Concluding paragraph with balanced conclusion

Is it time to change the inflation target?

Is it time for a change of policy objective? Current economic crisis 1.Inflation less of a priority Plenty of spare capacity Businesses have little pricing power Workers have weak bargaining power 2.Avoiding depression and price deflation 3.Avoiding the damaging effects of high unemployment 4.High levels of consumer & govt debt 5.Is there a case for allowing higher inflation?

Low inflation should no longer be the number one priority for macroeconomic policy Knowledge AnalysisInflation less of a priority given the big picture. Lots of spare capacity. Lots of competition, little wage bargaining power for workers. ApplicationGrowth figures Unemployment Evaluation

WEE STEPS to Evaluation W E E S T E P S

W Wider context – consider the bigger picture and use it to weight your arguments E E S T E P S

WEE STEPS to Evaluation W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E S T E P S

WEE STEPS to Evaluation W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E Equality – Do some parties benefit more/less than others? S T E P S

WEE STEPS to Evaluation W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E Equality – Do some parties benefit more/less than others? S Scope – How many people are affected by the point? Is it wide reaching or narrow? T E P S

WEE STEPS to Evaluation W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E Equality – Do some parties benefit more/less than others S Scope – How many people are affected by the point? Is it wide reaching or narrow? T Time – How long will it last, SR or LR or both? E P S

WEE STEPS to Evaluation W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E Equality – Do some parties benefit more/less than others S Scope – How many people are affected by the point? Is it wide reaching or narrow? T Time – How long will it last, SR or LR or both? E Effectiveness – does it solve the issue that it was intended to solve? P S

WEE STEPS to Evaluation W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E Equality – Do some parties benefit more/less than others S Scope – How many people are affected by the point? Is it wide reaching or narrow? T Time – How long will it last, SR or LR or both? E Effectiveness – does it solve the issue that it was intended to solve? P Prioritisation – which of your points is the strongest and why. Be specific about the context of the question S

WEE STEPS to Evaluation W Wider context – consider the bigger picture and use it to weight your arguments E Efficiency – Does this achieve a more/less efficient allocation of resources? E Equality – Do some parties benefit more/less than others S Scope – How many people are affected by the point? Is it wide reaching or narrow? T Time – How long will it last, SR or LR or both? E Effectiveness – does it solve the issue that it was intended to solve? P Prioritisation – which of your points is the strongest and why. Be specific about the context of the question S Scale or Magnitude – where people are affected how strong is the impact?

Low inflation should no longer be the number one priority for macroeconomic policy Knowledge AnalysisInflation less of a priority given the big picture. Lots of spare capacity. Lots of competition, little wage bargaining power for workers. ApplicationGrowth figures Unemployment EvaluationTime scale – right now the change may be sensible, but if we come away from an inflation target what may happen in the long run? Investment? Stability? We still have cost- push inflation danger!

Consider using a writing frame in your revision Knowledge Analysis Avoiding depression and price deflation. Deflation and its costs –Downwards demand spiral. Increasing size of real debt, damage to savings. ApplicationJapanese growth 1990’s. Diagram showing negative multiplier/accelerator. EvaluationWider context – How significant a threat is there of deflation in the economy today? Confidence rising, growth rate returning. Is there not a greater risk that avoiding deflation will allow inflation to get out of control. Don’t we already target deflation? We still have cost-push inflation!

Consider using a writing frame in your revision Knowledge AnalysisTarget should be debt reduction. Debt means increased tax, decreased investment, decreased consumption. Increased cost of borrowing. ApplicationGovernment debt at 62% and predicted to rise. Danger to credit rating. Cite Greece with debt over 110% and junk bond rating. AD & LRAS analysis diagram showing shifts inwards in both due to lack of investment and government spending. Evaluation

Consider using a writing frame in your revision Knowledge AnalysisTarget should be debt reduction. Debt means increased tax, decreased investment, decreased consumption. Increased cost of borrowing. ApplicationGovernment debt at 62% and predicted to rise. Danger to credit rating. Cite Greece with debt over 110% and junk bond rating. AD & LRAS analysis diagram showing shifts inwards in both due to lack of investment and government spending. EvaluationPrioritisation – Recognition that short-term risks of spiralling debt may outweigh cost of inflation, inflation also reduces debt in real terms. Perhaps medium term inflation is a better objective.

Good evaluation phrases to use However Hence Nevertheless Although It is likely that The tendency is But In retrospect

Good evaluation phrases to use With the benefit of hindsight On the other hand In the short run …….. but in the long run It depends upon The data suggest that According to the extract

WWider context EEfficiency EEquality SScope TTime EEffectiveness PPrioritisation SScale or Magnitude Eight wee steps to great evaluation

Tutor2u Keep up-to-date with economics, resources, quizzes and worksheets for your economics course.