Revision: Inflation Targets and Measurement

Revision on inflation targets and the inflation measurement issue. Tim Harford’s Radio 4 Programme ‘More or Less’ this week looked at the issue of inflation measurement

Revision PowerPoint
Inflation_Targets.ppt

UK Economy Revision Presentation

Here is a PowerPoint version of the revision presentation given to students in recent days.

PowerPoint
UK_Economy_Presentation.ppt

No longer over a barrel?

David Smith turns his attention to oil prices in today’s Sunday Times and asks why the spiraling cost of crude has not hit global economic growth and inflation as much as in past oil shocks. Most of the recessions and major slowdowns in the global economy have been pre-dated by spikes in international commodity prices. Has oil now lost the power to shock?

David quotes a new report from the National Institute of Economic and Social Research which mentions the long term decline in oil dependency for the UK economy and the effects of a flexible labour market on wage bargaining power. There are two excellent evaluation points for any essay on oil in the exams this summer.

“Ray Barrell, an economist with the institute, said the big change is that economies are less directly sensitive to oil prices than they used to be. The “energy intensity” of growth – the amount of oil, coal and gas needed to produce an increase in gross domestic product – has halved since the 1970s, reflecting greater energy efficiency and the shift away from heavy manufacturing. Labour markets have also become more flexible, said Barrell, so workers accept temporary reductions in real wages when energy prices rise, while in the past they would have demanded compensation. The wage-price spiral used to mean expensive oil led to inflation, unemployment or both. Central banks now are under less pressure to act to head off the “second round” inflationary effects of dearer oil.”

The rest of David Smith’s article can be read here:

Elegy for Estate Agents

The Independent reports that ”up to 1,800 estate agents may go bust by the end of the year unless lenders ease up their squeeze on new mortgages, as fears grow that the UK is heading for a full-scale housing crash, with price falls of up to a fifth.”

Maybe the warm weather has dulled my sense of sympathy, but I cannot help thinking that this will be good news for the housing sector as a whole. The property boom has lasted long enough for estate agents to make plenty of money and the best ones should have little difficulty surviving - the true test of an estate agent is the deal that they can provide for the home-seller during difficult times. A phase of Darwinian ‘survival of the fittest’ will be no bad thing.  Rosie Millard writes in the Sunday Times:

“Well, there’s a silver lining in that somewhere. With nobody selling any property — at least not for about another five years — all the estate agencies will go out of business, which means high streets up and down the country will become a bit more interesting, as they will start having proper shops on them again. Except that nobody’s going to have any money to spend in them, so they will all go bust too.”

A cluster of profit warnings

Rarely a day goes by without one or more household names in the world of business, finance and commerce releasing a profit warning to the city. Listed companies are required to do so - releasing information that might materially affect the market value of their business - but the rash of profit warnings from different sectors of the economy is a reflection of the demand and cost pressures facing private sector companies. The squeeze is on and it will be interesting to see how corporate Britain reacts and responds to these challenging times.

Parcel problems ruffle Rentokil

Starbucks reports falling profits

Bovis sets out new profits warning

Downturn sparks Electrolux loss

Conference Line Up

There is an exam season to get through yet, but I am already looking forward to the annual conference for Economics teachers to be held at the superb British Library conference centre on Friday 27th June. The main aim of the day is to enjoy some presentations and discussions from a panel of high quality speakers, all of whom have a notable reputation in their own field. The 2008 Conference promises to be one of our best ever.

Revision: Climate Change Policies

A brief revision PowerPoint used in a lesson on climate change policies .... I kept the analysis diagrams outside of the presentation

PowerPoint
Climate_Change_Policies.ppt

RES Competition - Word Limit

I have had a couple of email requests from students asking if it is ok to go over the word limit (which is 2000 words).
The answer is no - to be fair to all students, we will not judge essays which exceed that limit

A2 Macro Diagrams

In our revision session today we were discussing which diagrams can be used in A2 macro questions. Here is the initial list we came up with ... can students and teachers suggest more? I will happily put together a powerpoint with the diagrams suggested.

The Monetary Stimulus

There was no change to UK base interest rates this week with the Monetary Policy Committee holding rates at 5.0% for May. Across the Channel, the hyperactive (!) European Central Bank also kept policy rates constant for what now seems like an eternity! Thank heavens the UK remains outside the Euro Zone! Whilst policy rates are at 5% for the moment, this does not mean that monetary policy is not acting as a stimulus to one or more of the components of aggregate demand (C+I+G+X-M).

The overall stance of monetary policy includes the effects of base rate movements and also changes in the external value of sterling against a basket of other currencies. So whilst interest rates have edged lower in recent months we should also take into account the major depreciation of sterling against the Euro Zone with whome we do more than half of our trade. A falling pound acts as an important stimulus to the export sector of the economy, even though the boost is muted somewhat by a slowdown in economic growth in our export markets. Will the lower pound be a white knight for the faltering UK economy?