Unit 4 - Jun 05 Mark Scheme
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Thursday 31 March 2011
Tuesday 29 March 2011
Unit 4: Rising inflation in Vietnam - what can the government do?
You guys should discuss the possible causes of high prices in Vietnam and evaluate different options available to the government to solve the problem.
Sunday 27 March 2011
Unit 2: Supply Side and Japanese Efficiency: Amazing Japanese road repair job!
It took the road repair crew 6 days to fix the damage done to the road below left (and more images can be found by clicking here). After it was announced in Wednesday’s budget that £100 million is to be set aside to fix Britain’s potholes (Click here for clip), here’s hoping we can go about filling the holes with something resembling this level of efficiency!
Saturday 26 March 2011
Unit 2 & 4: The Budget 2011
Wednesday 23 March 2011
Unit 2: Economics for Clowns! (The Circular Flow of Income
A hugely popular you tube clip (well according to Aidan!)....
Unit 2: The impossble budget!!!
In the run-up to today's Budget, ministers have been banging on that their priority is to promote growth.
So today the Treasury and Business Department will publish a paper alongside the Budget red book that will be their prescription for rebalancing the UK away from a consumer-driven, debt fuelled, City-focussed economy to one where advanced manufacturing, the creative industries, tourism, pharmaceuticals, business services other than finance, inter alia, all have a bigger role. (ie successful supply side growth)
The impossible-to-ignore background is that recovery from the 2008-9 great recession has been insipid, and that the record burden of household, bank and government debt is weighing heavily on the UK economy's ability to grow.
To remind you what you all know (sorry), public expenditure is being cut to shrink a deficit perceived as unsustainable. And consumer spending is under intense pressure from a squeeze in disposable income and a growing recognition in households that their indebtedness - still at unprecedented levels - needs to be reduced.
Which means that the heavy lifting in the economy has to be done by private-sector companies.
(C + I + G + X-M)
Unless they invest more, export more and employ more, the three-year squeeze in living standards suffered by the vast majority of us may continue for many more years. Without growth generated by private sector companies, unemployment may not fall to any significant extent, wages won't start to rise to offset the effects of inflation and the government won't receive incremental tax revenues that would allow future tax cuts or improvements in public services.
Without growth, the coming years look bleak for the UK.
But what on earth can the chancellor do to promote growth - to encourage more investment by companies, to stimulate exports - if he has no money to give away?
At the weekend, George Osborne said that the Budget would be fiscally neutral - which means that any tax cuts in one area would be matched by increases in other taxes or new spending reductions.
If for example he were to decide it is an imperative to reduce the financial burden on companies by cutting corporation tax faster or by more than he has already said he would do, savings would have to be found elsewhere.
Which means that some of us would feel the victims of the government's determination to help the private sector, bringing political risks for the coalition government.
For business, it is not just the rate of corporation tax that matters. Multinationals have been banging on for years that rules on how their profits outside the UK is taxed means that the advantages of having a head office or domicile in the UK are no longer what they were. Some international companies, such as the advertising group WPP and the pharmaceuticals company Shire, have already packed their bags and relocated to Dublin.
Apart from tax, companies are also deeply concerned about whether Britons have the skills necessary to equip the UK for the global commercial war against India, China, Korea, Germany and so on.
Some have questioned whether at a time when it would presumably enhance the UK's growth potential for its workforce to become smarter, it was sensible to raise the personal cost of obtaining university education to a maximum of £9,000 a year. If the increased private cost of education deters younger people from investing in their skills, that would not lift the UK's productivity.
Any moves by the government to boost apprenticeships, work experience and vocational training (and it's clear from weekend media leaks that there will be a fair bit of all this) will be perceived to be important. But, again, there are limits on what government can do because of budgetary constraints.
That said, not all possible measures to stimulate growth costs money.
There is one area of commercial activity where businesses feels particularly annoyed, that of development - or the building of offices, supermarkets, factories, houses and infrastructure. Companies have been shouting loudly for years that the UK's growth prospects have been inhibited by an officially sanctioned nimbyism, by the long delays and massive restrictions placed on any ambitious development.
That said, if there is the kind of sweeping liberalisation of planning and construction that businesses would want, if the powers of local authorities to curb development are reined in, there may be elation felt by housebuilders and developers - but homeowners may feel anxious and miffed, only weeks before important local elections.
So today the Treasury and Business Department will publish a paper alongside the Budget red book that will be their prescription for rebalancing the UK away from a consumer-driven, debt fuelled, City-focussed economy to one where advanced manufacturing, the creative industries, tourism, pharmaceuticals, business services other than finance, inter alia, all have a bigger role. (ie successful supply side growth)
The impossible-to-ignore background is that recovery from the 2008-9 great recession has been insipid, and that the record burden of household, bank and government debt is weighing heavily on the UK economy's ability to grow.
To remind you what you all know (sorry), public expenditure is being cut to shrink a deficit perceived as unsustainable. And consumer spending is under intense pressure from a squeeze in disposable income and a growing recognition in households that their indebtedness - still at unprecedented levels - needs to be reduced.
Which means that the heavy lifting in the economy has to be done by private-sector companies.
(C + I + G + X-M)
Unless they invest more, export more and employ more, the three-year squeeze in living standards suffered by the vast majority of us may continue for many more years. Without growth generated by private sector companies, unemployment may not fall to any significant extent, wages won't start to rise to offset the effects of inflation and the government won't receive incremental tax revenues that would allow future tax cuts or improvements in public services.
Without growth, the coming years look bleak for the UK.
But what on earth can the chancellor do to promote growth - to encourage more investment by companies, to stimulate exports - if he has no money to give away?
At the weekend, George Osborne said that the Budget would be fiscally neutral - which means that any tax cuts in one area would be matched by increases in other taxes or new spending reductions.
If for example he were to decide it is an imperative to reduce the financial burden on companies by cutting corporation tax faster or by more than he has already said he would do, savings would have to be found elsewhere.
Which means that some of us would feel the victims of the government's determination to help the private sector, bringing political risks for the coalition government.
For business, it is not just the rate of corporation tax that matters. Multinationals have been banging on for years that rules on how their profits outside the UK is taxed means that the advantages of having a head office or domicile in the UK are no longer what they were. Some international companies, such as the advertising group WPP and the pharmaceuticals company Shire, have already packed their bags and relocated to Dublin.
Apart from tax, companies are also deeply concerned about whether Britons have the skills necessary to equip the UK for the global commercial war against India, China, Korea, Germany and so on.
Some have questioned whether at a time when it would presumably enhance the UK's growth potential for its workforce to become smarter, it was sensible to raise the personal cost of obtaining university education to a maximum of £9,000 a year. If the increased private cost of education deters younger people from investing in their skills, that would not lift the UK's productivity.
Any moves by the government to boost apprenticeships, work experience and vocational training (and it's clear from weekend media leaks that there will be a fair bit of all this) will be perceived to be important. But, again, there are limits on what government can do because of budgetary constraints.
That said, not all possible measures to stimulate growth costs money.
There is one area of commercial activity where businesses feels particularly annoyed, that of development - or the building of offices, supermarkets, factories, houses and infrastructure. Companies have been shouting loudly for years that the UK's growth prospects have been inhibited by an officially sanctioned nimbyism, by the long delays and massive restrictions placed on any ambitious development.
That said, if there is the kind of sweeping liberalisation of planning and construction that businesses would want, if the powers of local authorities to curb development are reined in, there may be elation felt by housebuilders and developers - but homeowners may feel anxious and miffed, only weeks before important local elections.
Unit 2: Inflation explained
Click here to access an essential link for all students taking the Unit 2 examination in June.What is thr root cause of inflationary pressure in the UK?
What are the implications for any interest rate decision this month?
What would you do if you were George Osborne today (Budget Day)?
Monday 21 March 2011
Unit 2 & 4: UK Economy: Nominal and Real Interest Rates
This blog will keep track of nominal and real interest rate data for the UK economy. Nominal interest rates are the money rates of interest for example the policy rate set by the Bank of England. The real interest rate is the actual interest rate (the nominal interest rate) minus the inflation rate.
Questions to consider;
How will this affect AD in the economy (other things being equal)?
What are the long term implication for LRAS?
Questions to consider;
How will this affect AD in the economy (other things being equal)?
What are the long term implication for LRAS?
Sunday 20 March 2011
The Story of Economics
Click here to access the podcast.
Saturday 19 March 2011
Unit 2: Keeping track of macroeconomic objectives
Traditionally towards the end of an AS macro course we brings things together by focusing on the possible trade-offs or dilemmas facing economic policy-makers not least in an age of great uncertainty and change. I have usually emphasised the following macro economic indicators as being key though others are sure to differ!
* Price stability (low positive inflation)
* Rising employment / an improving unemployment rate
* Sustainable growth of real GDP / national income
* A degree of balance in trade in goods and services (a sustainable external position on the current account)
* Manageable public sector finances - including sustainable debt levels and annual budget financing
In this blog and using the Timetric data I plan to keep all of this data in one place and automatically updated so that I can return to it when needed and so too can students if they need to refresh quickly and easily what is happening in the UK economy. The charts can be found below
* Price stability (low positive inflation)
* Rising employment / an improving unemployment rate
* Sustainable growth of real GDP / national income
* A degree of balance in trade in goods and services (a sustainable external position on the current account)
* Manageable public sector finances - including sustainable debt levels and annual budget financing
In this blog and using the Timetric data I plan to keep all of this data in one place and automatically updated so that I can return to it when needed and so too can students if they need to refresh quickly and easily what is happening in the UK economy. The charts can be found below
Monday 14 March 2011
Wednesday 9 March 2011
Unit 2 & 4: Monetary Policy & Quantitative Easing Feb 11
A useful presentation on Monetary Policy with some really up to date information.
Monetary Policy Feb 11
View more presentations from mattbentley34.
Tuesday 8 March 2011
UNIT 2 & 4: Timetric: Research and Development in the UK
The data on research and development in the UK always seems to be a few years out of date. As our Timetric chart shows below, the percentage of GDP devoted to R&D has remained stubbornly below 2% but what has happened since 2007? Has the recession caused a downward spike in R&D spend? or have tax credits for research had any impact on the R&D scorecard?
Monday 7 March 2011
Y12 Homework: Essay
Assess the likely economic impact of an increase in government spending on education and health in both the short and the long run. (30)
This essay requires you to focus on the effects on the main macro economic objectives. These include;
inflation, unemployment, balance of trade, economic growth (short term & long term), government finances etc
You should use AD/AS analysis when answering the question. The essay should take around 35 minutes in an examination.
This essay requires you to focus on the effects on the main macro economic objectives. These include;
inflation, unemployment, balance of trade, economic growth (short term & long term), government finances etc
You should use AD/AS analysis when answering the question. The essay should take around 35 minutes in an examination.
Sunday 6 March 2011
Unit 2 & 4: Sterling against the US Dollar
Another good 'Timetric' chart follows the path of the pound sterling against the US dollar. We have linked below the chart to some recent blog posts related to the economics of currencies / foreign exchange - relevant both for AS and A2 macro ....
Sterling against the US dollar
Sterling against the US dollar
Wednesday 2 March 2011
Tuesday 1 March 2011
Unit 2: Definitions of Inflation, CPI Vs RPI
The main inflation rate in the UK is now the CPI Consumer Price Index.
The CPI is based on the HCIP (Harmonised Consumer index prices) which measures inflation on internationally agreed standards throughout Europe.
•The RPI (Retail price index) includes mortgage interest payments. Thus changes in the interest rates effect the RPI. If interest rates are cut, it will reduce mortgage interest payments. Thus the RPI will fall but not the CPI.
•The RPI also includes council tax and some other housing costs not included in CPI
•The CPI includes some financial services not included in the RPI
•The CPI is based on a wider sample of the population for working out weights.
Definition of Deflation
Deflation is a fall in the price level of the economy. It means there will be a negative inflation rate.
CPI and RPI Measures of Inflation
RPI - retail price index includes mortgage interest payments and so tends to be more volatile. A cut in interest rates will reduce RPI
CPI - Consumer Price Index excludes mortgage interest payments
The CPI is based on the HCIP (Harmonised Consumer index prices) which measures inflation on internationally agreed standards throughout Europe.
•The RPI (Retail price index) includes mortgage interest payments. Thus changes in the interest rates effect the RPI. If interest rates are cut, it will reduce mortgage interest payments. Thus the RPI will fall but not the CPI.
•The RPI also includes council tax and some other housing costs not included in CPI
•The CPI includes some financial services not included in the RPI
•The CPI is based on a wider sample of the population for working out weights.
Definition of Deflation
Deflation is a fall in the price level of the economy. It means there will be a negative inflation rate.
CPI and RPI Measures of Inflation
RPI - retail price index includes mortgage interest payments and so tends to be more volatile. A cut in interest rates will reduce RPI
CPI - Consumer Price Index excludes mortgage interest payments
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