Examination Tips Part 2

All your hard work means nothing if you don't put what you know into paper properly. If you missed part 1 check it out here: Exam Tips 1

1. Create links
Create links with your question and other relevant topics. For example, if you are talking about inflation link it to other macro-economic factors such as balance of payments or the exchange rate. Show the examiner that your knowledge is not just limited to what you read from the textbook, analyze the question in light of its context.

That being said, make sure your answer actually answers the question and you don't go off and talk about another topic.

2. News events
As said above, show that you can do more than regurgitate what is in the textbook, be able to apply knowledge to situations. The current "economic meltdown" is prime for you! Use your knowledge of news events and show how you can apply your theory. Don't be afraid to use local news as well, that is okay! The examiners are not ignorant, they understand that you are doing an international examination and you can use what is happening in your own country. In fact, they encourage it.

3. Think before you ink!
Think about what you are going to write before you write it. Otherwise half-way through your answer you will realise you need to add things here and there and it gets messy. Sure the examiners can follow your stars and arrows, but why not just make it easy for them to give you marks? A planned answer shows! Do you know what shows even more though? An unplanned answer, the lack of coherency will not give the marker confidence in your ability.

4. Manipulate data
When given tables or graphs, don't just straight copy down data. Do some manipulation even things as simple as percentage changes (which you should know how to do by the way) will do. Just don't copy and paste.

Usually answers will involve some sort of data manipulation and most of the time it is basic arithmetic.

5. Have courage!
Have the courage to challenge statements and data. Do not fall into the trap of accepting everything you see, ask questions and do not be afraid to contradict what is being said.

An excellent demonstration of your knowledge is to be able to challenge the question. That being said, challenge within reason, be able to state your case clearly. Challenging data is not that drastic, it can be as simple as pointing out pitfalls in a certain indicator!



I know many of you have exams coming up now, I try my best to help you get those marks!

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Types of Businesses- Joint Stock Companies

What are joint stock companies?

Joint stock companies are owned by shareholders, there is usually a separation between ownership and management.

The company is divided up into many shares which are held by people or groups. They elect a board of directors who oversee the day to day running of the business, these people have a duty to protect the interests of the shareholders. The board of directors can also appoint others to look after the day to day running of the business as well as other employees.

Joint stock companies benefit from limited liability, this means that should the business fail the shareholders liability is only limited to the price they paid for the shares or has left to pay. e.g. if the shareholder bought 1 share at $10, and paid $8 for it, should the business fail the shareholder will only have to pay $2 for it (the remainder of his share).

In most countries there are two types of companies that issue stock.

1. Private limited company- which is owned by private individuals and the shares are not sold on the market
2. Public limited company- owned by individuals in the public, the shares can be bought and sold on the stock-exchange.
   

So what the benefits of joint stock companies?

1. limited liablity - see above
2. easier to raise finance as they can sell shares to raise capital, and they are usually larger so have more credibility (not always true), and they can also raise finance through debenture or bond issues
3. can take advantage of specialised knowledge of managers

Sounds perfect right? Again there are downfalls

1. they have to publish accounts yearly
2. they are more expensive to set up and have more requirements under the law
3. original owners can lose control of the business
4. ownership and management are separate and often conflict of interests may occur.

Pretty straight forward stuff, next time co-operatives!

Types of Businesses- Partnerships

Partnerships are much like sole traders, the only exception is that there is more than 1 owner. This usually occurs in the professional industries e.g. lawyers, accountants, doctors. When you hear about a law firm or an accounting firm that word 'firm' refers to a partnership.

Often businesses may start out as sole traders, and then move on the partnerships. What may be the reasons for this?

1. need extra funding without wanting to borrow money (interest costs)
2. extra skills
3. share in the workload

However as with anything, disadvantages do exist.

1. unlimited liability exists just like a sole trader business
2. profits must be shared
3. one partner's actions can ruin the entire business
4. if a partner leaves, the partnership is dissolved and a new partnership agreement must be formed
5. a partnership agreement is usually required, however if one does not exist there are some default terms that are available.
   

Next up, joint stock companies!

Economic Decisions and Types of Economies

Remember that post a while ago when we talked about the basic economic question? How to best allocate those scarce resources to satisfy as many needs and wants?

From this 3 more questions arise:

1. What to produce?
2. How to produce?
3. For whom to produce?

Well how countries answer these questions determine the type of economy they are. We have 3 different types:

1. Planned or Command Economies
2. Market Economies
3. Mixed Economies

Planned or Command Economies

These are economies where the government decides what to produce, how to produce and for whom to produce. There is little input from market forces i.e. the forces of demand and supply. 

A great deal of planning is involved in these economies. The government aims to create greater equality among the people, and the reason for producing goods and services is to satisfy needs. Because the government decides how to produce goods and services there is often only one of each good available and a single producer. That producer, as it is controlled by the government lacks the profit incentive so there is no need to improve goods and services or efficiency. 

Today there are no true command economies but the closest examples would be China and North Korea. 

Advantages	Disadvantages
Most basic needs are provided for	Less Choice in Goods and Services
Greater equality	Lower quality of goods and services as there is no competition
	Less efficiency, higher waste as there is no competition or profit incentive

Free Market Economy

In a market economy the economic decisions are made by individuals through the forces of demand and supply. The goods and services that are produced are made on the basis of demand, so there is a profit incentive. Many firms produce goods and services which creates competition and in turn greater efficiency as firms need to keep costs low in order to survive. 

There is greater consumer sovereighty, the ability of consumers to choose what they want to consume. As a result, there is a greater range of goods and services. 

Resources are owned by individuals who will produce goods and services for profit. 

Again at this end of the continuum there are no true free market economies, the closest will most likely by the United States of Ameria. 

Advantages	Disadvantages
Greater range of goods and services	Those who can’t afford goods miss out on them
Higher quality	Greater inequality
Better efficiency
Better satisfaction of wants and needs

Mixed Economy

The middle ground of the two economies and where most of the world is at, there is production by both the private sector and the public sector. The government intervenes when the market fails (check out the post on market failure)