Unit 4: Balance of trade around the world

FT Video has a short animation by Martin Wolf explaining why global trade imbalances matter. This is a great introduction to balance of payments. 

Remember, you MUST be quite clear on the difference between a trade surplus or deficit and a government surplus or deficit - which is a classic confusion for a great many. 




You need to understand not only that some countries have vast current account trade surpluses, as shown in this graph from The Economist in 2012, but also that some of those cash mountains are then used to fund buying government debt from countries. 



Challenge: To investigate that issue, I suggest two articles; for the UK, try this in the FT about foreign investors selling UK gilts and the other from CNS News about foreign holdings of US Treasury Bills.

Unirt 2 & 4: Economic Policy from UK, Russia & EU.

Thanks to Eyad for finding these two articles on two economies around the world.

This one looks at how the Russian government is trying to get out of the current crisis they are in.

This one looks at the UK economy. Recent gdp growth data suggests the UK economy is strong, with growth figures of 2.6% this year. (Click here for excellent piece looking at key economic data over a period of time)

There are several economies that are looking at different ways to get out of recession. The UK kept with austerity, the Russians are looking at increased government spending,whilst Europe are looking to quantitative easing. Click here for article explaining rationale behind a bond buying programme.

Really useful to compare different ways of dealing with economic issues.

Unit 3: UK mobile industry - highly concentrated!

Thank you to Graham for this excellent clip discussing the impact on 3's takeover of O2.

Looks at concentration ratio's, pricing issues and oligopoly markets. Also raises the issue of regulation and why has this takeover been allowed?

Unit 4: A richer, but more unequal world!

This issue is emerging as one of the big, if not the biggest, economics story of our times. The world is vastly richer than in even the recent past, with many poor countries making good progress in catching up with the richer ones.

Yet within almost all economies, income and wealth gaps are widening. Last year Oxfam were talking about a double decker bus, representing the world’s richest people, who own half the wealth. This year wealth is concentrated in even fewerhands.

The BBC and Guardian carry the Oxfam story about steeply rising wealth inequalities.

This is a huge topic. You can start by thinking what may be behind this problem. More time could go into analysing its effects. (see slideshow below)

Inequality, Economic Growth and Development from tutor2u

The good news is that the BBC are launching a new series – A Richer World. The trailer says ‘the world is getting wealthier - we live longer, eat better, are better educated and fewer people live in extreme poverty. But with the gap between rich and poor feeling bigger than ever, the BBC is investigating the winners and losers of this richer world in 2015.

There’s a good video clip to introduce the series here, and a short trailer using the example of New York City to illustrate rising inequality within American society.

Many of the points raised above provide useful evaluative information for any question on policies to reduce income inequality.

Here is an interesting question.....what did you see in the picture?

Unit 3: UK Gas Prices...we said it would happen!

Scottish Power has become the third major gas supplier to announce a price cut, with the news it is to reduce prices by 4.8% from 20 February.  Click here for full article.

Lots of excellent economics for Unit 3, including kinked demand curve theory, regulatory power (have the gas companies gone far enough), oligopoly behaviour etc

Unit 4: World inequality

Oxfam have released data claiming that 1% of the worlds population own more than 50% of the world wealth. Click here for the article.

Activity: Find out what Oxfam's 7 point plan to reduce world inequality involves, and how effective it would be.

The above would be excellent for any essay on how to reduce poverty/inequality.

Unit 2 & 4: Why is low inflation a bad thing?

CPI inflation has slipped well below the lower limit of the Monetary Policy Committee's target, to 0.5% - that is far lower than it fell during the recession, and the lowest level since May 2000. So, as Mark Carney prepares his letter to the Chancellor to explain how this has happened, and what the Bank of England intend to do about it, the BBC have published an article which examines why we need some inflation. It is one of those articles which is truly useful - probably more so than a text book as it is based on real, current context. 

Highly recommended to AS students learning about inflation for the first time, and A2 students who need to revise the basics. 

Robert Peston takes this a bit further, in a blog which A2 students should certainly read, as it examines the risk of deflation, and whether 'benign' price falls in food and fuel might become 'growth-killing' deflation. Again, it is textbook stuff which is happening in real-time, and really useful background for students. 

We have to wait to see Mark Carney's letter to the Chancellor, which will be published by the Bank of England alongside the February Inflation Report on 11 February. 

However, in the meantime,  ITV's Economics Editor Richard Edgar has his own ideas of what it may look like -drafting Mark Carney's letter could be a tempting exercise for prep, this week!

Unit 2 & 4: UK Inflation falls to 0.5%

Recent inflation figures in the UK were released yesterday. Click here to read the article. It raises many questions.

How can the government solve this issue?
What would happen if the economy had deflation?

Excellent for both Unit 2 & 4.

Unit 4: China's exports on the rise!

Thanks to Elliot for finding this article on China's latest trade figures.

Links to the oil price, balance of trade, government stimulus packages.

Unit 3: EOn reduce Gas Prices

Thank you to Aara for finding this article on EOn reducing gas prices. Lots of relevant stuff here for Unit 3 exam.

Regulation, interdependence, Oligopoly etc.

It will be interesting to see if the other Utility firms follow suit. Watch this space!

Unit 3: Price capping - Rail fairs to rise by 2% in 2015.

Average rail fares will rise by 2.2% from 2 January, the rail industry has said, marking the lowest rise for five years.

In September, the government said regulated rail fare rises would be pegged to July's measure of Retail Price (RPI) inflation rather than capped at RPI plus 1%.

Click here to read the article. 

Unit 3: Tesco, Coke and diseconomies of scale

This week we have read news of two corporate giants taking strides to rein in their operating costs amidst challenging business conditions. 

2014 was an annus horribulus for Tesco  as the grocery giant battled a string of profit warnings, declining like-for-like sales and the controversies surrounding mis-reporting of profits. Their new CEO has announced the shelving of many new larger stores, the closure of others (including those built but never opened) and the disposal of non-core assets such as Blinkbox. 

The final dividend to shareholders has been dropped in a bid to build up a larger buffer stock of cash. It is a classic example of a business that has grown too large; an unwieldy business facing severe competition from the fast-growing deep discounters such as Aldi and Lidl.

Coca Cola has also announced well over a thousand job cuts in the wake of sluggish revenue growth and declining profits. I was staggered to read that they employ over 130,000 people worldwide!

Unit 4: Deflation in Eurozone countries

There is so much going oin in the world of economics at the moment. Latest figures show that the Eurozone, as predicted, now has deflation. 

The tip into deflation adds pressure on the European Central Bank (ECB) to take further action to stimulate the bloc's economy.

Click here for the BBC article.

Unit 2 & 4: More data on Russia - excellent application to theory

The recession and currency crisis in Russia provides plenty of material for both AS and A2 students to get their teeth stuck into.

AS students could consider the inflationary effects of the plummeting rouble. With inflation at 9.1% and "Russian shopkeepers re-pricing their goods daily" it provides an excellent real world example of what is often referred to in textbooks as menu-costs. 

With the rouble depreciation nearly 50% against the dollar in a matter of weeks it is also a useful example of imported inflation, pushing food price inflation to over 30%, which is eroding the living standards of the majority of working Russians.

A2 students could look at the attempts of the central bank to defend the currency. A 6.5 percentage point increase at 1am on the 16th December took the interest rate to 17%, a 12.5 point increase from the start of the year. 

Russia has also spent some $80bn dollars in 2014 defending the value of the currency. 

The initial effects of he rate rise was indeed to strengthen the rouble but the gains were eroded and reversed by the end of the day. Lots of interesting discussions to be had about what drives currency movements.

There is also plenty of discussion about Russia's debt, both dollar-denominated and rouble-denominated. The ability of Russia pay back $115bn of dollar debt which is due in 2015 is increasingly being called into questions as the rouble depreciates. 

This is obviously not just a Russian specific issue, the elections in Greece and the potential 'Grexit' could put Greece's euro-denominated debts under huge pressure.

All this is without even mentioning oil prices. Brent crude oil traded at $50 yesterday, a fresh low.

Unit 4: The Economic Hitmen!

I found it....great clip which highlights the issues that foreign aid and FDI can have on developing countries. If you get chance, read the book!

Unit 4: Inflation in Russia - depreciating Rouble

Click here to access an article looking at the opposite problem to the Eurozone, in Russia. Whereas the Eurozone is worried about deflation, Russia's issue is inflation!

Another excellent up to date example of how the currency can affect the rest of the economy.

What are the options for the Russian government?
Is it another example of primary product dependency causing havoc for the rest of the economy?

Unit 2 & 4: Monetary Policy in the Eurozone.

Draghi comments send Euro to lowest level since 2010

Click here to read an interesting article regarding monetary policy in the Eurozone. There is lots in it for macro economics students.

Not least:

Monetary Policy
Quantitive easing
Exchange Rate
Deflation

Make sure you understand the link between all of the above concepts. Please discuss with your teacher.