Diagrams Flashcards
Name the abcd them ones
Area A represents the gain in producer surplus. Area B and D represent the welfare loss. Area C represents the government tax revenue from the tariff. It is the government that receives this money rather than the producer. The length of the rectangle is Q2 to Q4 which is the quantity of goods that have been imported. The height of the rectangle is the tariff per unit as it shows the difference in price. Multiplying the tariff per unit by the quantity of imports will give the total tax revenue.
The diagram below shows the market for jumpers in the UK.
The economy is originally trading jumpers freely and then it imposes a tariff. Which of the following shows consumer surplus before the tariff is imposed?
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The economy is originally trading jumpers freely and then it imposes a tariff. Which of the following shows consumer surplus after the tariff is imposed?
Consumer surplus is the difference between the price that consumers are willing and able to pay (shown by the demand curve) and the price they actually pay. Before the tariff, they are paying the world supply price and so consumer surplus is the area between that and the domestic demand curve = A+B+C+D+E.
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Consumer surplus is the difference between the price that consumers are willing and able to pay (shown by the demand curve) and the price they actually pay. After the tariff, they are paying the world supply (+tariff) price and so consumer surplus is the area between that and the domestic demand curve = A.
A worsening of the Current Account deficit is caused by an increase in imports and a decrease in exports. Draw the impact of this increase in imports and decrease in exports on the exchange rate diagram below.
An increase in imports means UK consumers must supply more pounds. A decrease in exports means that foreign consumers are demanding fewer pounds. This will cause the exchange rate to depreciate.
draw the impact that a reduction in the interest rate has on supply and demand.
(do up before and after
A reduction in a country’s interest rate makes saving less attractive to foreign investors. This will reduce their demand for that country’s currency and incentivise them to sell any of that currency that they are currently holding. This will lead to an increase in the supply of the currency in question which in turn means that the currency depreciates. (Showing either an increase in supply, or a decrease in demand, or both is fine).
Diagram for supply and demand of a currency.
The diagram below shows how exchange rates are determined by market forces. The vertical axis denotes the price of the currency (also known as its exchange rate), while the horizontal axis denotes the quantity of the currency. We now have a standard supply and demand graph which demonstrates how exchange rates depend on the supply and demand of a currency.
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A country has a Current Account deficit when it experiences a depreciation of its exchange rate. Draw a J-Curve diagram to show the effect of the depreciation on the Current Account.
In the short run, demand for imports is inelastic meaning a depreciation will increase import expenditure and worsen the Current Account. As demand becomes more elastic over time (like when companies finish their contracts), the demand for imports decreases leading to a decrease in import expenditure. This will then improve the Current Account.
Lorenz curve
The vertical axis needs to be labelled with Cumulative % of Income and the horizontal axis needs to be labelled with Cumulative % of Population. The line of perfect equality needs to be drawn from bottom left to top right. Since the question states that the country does not have significant inequality the Lorenz curve should be drawn bending close to the line of perfect equality.
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diagram that shows the market for grapes in bad, good and average harvests?
Supply is perfectly inelastic for all three harvests - each supply curve is shown by a vertical line. This means that any change in price will have no impact on quantity supplied.
The price for the bad harvest is very high at PB.
The price for the good harvest is very low at PG.
The Laffer Curve
The Laffer Curve is a graph to show the relationship between the tax rate and tax revenue and it looks like this:
resource crowding out diagram
Resource crowding out occurs when the economy is using all resources (factors of production) efficiently and the government then increases public expenditure. This will increase the price of these resources, which will meant that there is an opportunity cost to the private sector. At A, the economy is operating on the PPF and so all resources are being fully employed. Government provision of education then increases. An opportunity cost of this is that private sector provision of education decreases.
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Expansionary fiscal policy such as infrastructure spending
Investing in infrastructure would be a supply-side policy and would help to increase the long run potential of the economy. It allows businesses to operate more efficiently and increase productivity. This would shift LRAS to the right, as shown.
However, investing in infrastructure also involves an increase in public expenditure which is a type of expansionary fiscal policy. So, there is an overlap between some fiscal policies and supply-side policies.
Draw out an increase in education spending bro n what r the effedts &type of economic spending?
Investing in education would be a supply-side policy and would help to increase the long run potential of the economy by increasing human capital. It allows businesses to operate more efficiently and increase productivity. This would shift LRAS to the right as shown.
However, investing in education also involves an increase in public expenditure which is a type of expansionary fiscal policy. So, there is an overlap between some fiscal policies and supply-side policies.
