Exam Advice: 10 Ideas for a Better Economics Paper
Here are some thoughts on ways to improve your scores on your summer economics exam papers. They are in no particular order but I hope some of them might be useful
Ten Thoughts on Improving Your Economics Papers
Streamed presentation
PDF handout version
Prezi on Information Failures
Click below to open a new Prezi on aspects of information failures / gaps and market failure together with some of the interventions that might be used to address imfornation imperfections in many markets.
read more...»Is it still appropriate to use the term black market?
I am in the process of updating my Tutor2u Q&A’s for 2013 editions due out in the summer next year. One of areas I am tightening up on is the distinction between the official, shadow informal and underground economies and the unintended consequence of high levels of indirect taxation in creating – now what term would you now use?
read more...»AS Micro: Last-minute Unit 1 Exam Tips!
Our Year 12 economists are all departing on Friday for study leave, so I’ll be going through some key points they should bear in mind for their exams. Read on for a unit 1 tips sheet and other info…
read more...»Exam Advice: Multiple Causation
No doubt you have found in your revision that many factors can influence the direction of a single economic variable. For most key issues there are many short-term and longer-term contributing factors and strong students are aware of multiple causation and can bring this explicitly into their answers. For example:
*The causes of unemployment (demand and supply side causes): Presentation here
*The causes of inflation (cost push and demand pull, domestic and external): Presentation here
*Reasons behind changes in the exchange rate (trade, foreign direct investment, other capital flows, central bank intervention): Presentation here
*The many factors that the Bank of England and other central banks take into account when setting policy interest rates: Presentation here
*Causes of economic growth in both the short run and the long run (AD and LRAS causes): Presentation here
*Multiple causes of market failure and of government failure: Presentation here:government failure
*The reasons why producer cartels are often unstable: Presentation here
*The factors driving globalisation (and more recently de-globalisation): Globalisation blogs here
Examiners will always reward students who make an attempt to use relevant economic analysis and make it clear that several factors affect a particular economic variable (inflation, investment spending). Often we make use of the ceteris paribus assumption to isolate in theory the effects of one variable – but the real world does not allow this to happen! Challenging the ceteris paribus assumption can also add weight and value to your answer.
Exam Advice: Putting Things in Context
High level economics students at AS and A2 seem to have a happy knack of putting issues and debates into a clear context and this certainly counts as evaluation and scores good marks in your papers. Here is a brief revision note on the importance of context!
Exam Advice: Maintaining Balance in your Answers
In AS and A2 economics exams, especially in the essay questions that require evaluation, axaminers will always reward students who adopt a balanced approach and those who try to reason out and explain their arguments i.e. they demonstrate an awareness of different points of view / different schools of thought in Economics
Examples might include:
*Monetarist versus Keynesian views on the impact of fiscal and monetary policies as instruments of demand management during a recession
*The arguments for and against the Coalition’s plans to eliminate the structural budget deficit over the next four years
*Polluter-pays principle (carbon tax) versus tradable-permits (carbon trading) versus regulation as means of cutting emissions and addressing environmental market failure
*The arguments for and against manipulation of currencies as an instrument of macroeconomic policy
*Competing views on the relationship between economic growth and its long-term environmental impact.
*Different schools of thought on the benefits of competition versus regulation in a market
*Free market forces versus state intervention approaches to reducing child poverty or poverty in general
Discussion of competing theories leads naturally into good evaluation – For example, you may be asked to evaluate how well the free-market performs and the circumstances in which there may be a case for non-market (state) provision of goods or services or other forms of government intervention.
Maintaining a semblance of balance means avoiding extreme views or assertions that are never backed up with any evidence or examples. The final section of your essay answer does give you an opportunity to come to a reasoned conclusion that favours one side of an argument of another - but do this having considered a variety of arguments and perspectives rather than a narrow, blinkered approach!
Economics Q&A: Should the CAP be scrapped?
The Common Agricultural Policy is a system of farm support that was set up by the EU to assist the agricultural sectors of its member states. The CAP accounts for nearly half of the EU’s budget, at approximately £48bn, and combines direct subsidy payments and price support schemes. Economic welfare is concerned with levels of human well-being, and can be achieved through an efficient allocation of resources, thereby maximising consumer and producer surplus.
read more...»Economics Q&A: What factors help to explain rising food prices?
Global food prices have risen on average by more than 135% over the last 5 years. While the price of food has been highly volatile, with a spike during 2008, there is clearly a trend pattern of a long term rise. This can be attributed to various root causes, both demand and supply side in nature.
read more...»EU Economics: Hopes for a low carbon future in Europe
With EU carbon emissions market has closed since the middle of January after hackers stole €30m of permits the economics of a EU wide carbon tax has been given fresh prominence in recent weeks. Charles Hart evaluates the arguments for and against a tax on emissions in this super applied micro essay. After the essay there are some links to recent blog posts and other resources on carbon trading and carbon taxation.
read more...»Economics Q&A: Can economics provide answers to the crisis of collapsing stocks in global fishing?
The UK is one of many countries that now face a dilemma when it comes to fish stocks and their sustainability. In the UK we now consume over 385,000 tons of fish per year whilst on a global scale only 10% of large fish stocks that existed in the 1950s are still present today; this include both cod and tuna. Stock depletion has become a larger issue because of the increases in fishing technology – especially in long-line fishing which is the main technique used in Japan.
As a result many of the once inaccessible fish reserves have become economically viable to fish as boats are more fuel efficient and require less labour. In a fully functioning market the decline in supply of the product would cause an increase in price and act as a disincentive for consumers to purchase the product meaning that the industry would reach a sustainable equilibrium. In this case however there has been a deep market failure resulting from the tragedy of the commons. The sea, and its fish, is a common resource either on a global scale or on a national scale within a country’s own territorial waters. There are very few established property rights over the sea meaning that rational economic agents have an incentive to plunder the seas resources causing the falling fish stock levels.
read more...»Economics Q&A: How can the tragedy of the commons lead to environmental market failure?
‘The tragedy of the commons’, although created by Garrett Hardin, is a famous concept which can be traced back to Adam Smith. It refers to a situation where individuals or private economic agents exploit scarce and rival common environmental resources for their own rational, self-interested aims, leading to over-production and the possible permanent depletion of the resource for all.
The essence of this problem stems from insufficient and poorly protected property rights. In other words, as consumers do not own these common goods, they have little incentive to take care of and maintain it, but rather an incentive to extract as much personal utility or benefit from it as possible at that particular time. Therefore, the provision of property rights over some grazing land may help to prevent it being permanently destroyed – instead allowing utility to be extracted from it at a sustainable rate. However, as the tragedy of the commons is a problem where one’s actions affect the benefits of others in the future, concerns for intergenerational equity usually end up being dominated by concerns for personal benefits.
read more...»Economics Q&A: Will the rise in VAT harm the UK’s economic performance?
On January 4th 2011, the standard rate of value added tax (VAT) jumped from 17.5% to 20%. For the first time, the UK VAT rate is now the same as the basic rate of income tax! Prime Minister David Cameron has stated publicly that the rise in VAT is likely to be permanent rather than temporary. The UK economy will thus have to adjust to this higher rate but what are some of the possible macroeconomic consequences?
read more...»Economics Q&A: Does the UK economy achieve a trade surplus in anything?
The answer is yes! Although the British economy has overall run a large deficit in the balance of trade in goods and services for many years, if we look a little deeper underneath the trade statistics we can reveal a comparative advantage in a number of industries. Many of them are in the service sector which - as a whole - has generated sizeable and growing annual trade surpluses for the best part of two decades.
read more...»Economics Q&A: Will the Government spending cuts affect inflation?
In early July 2010 Chancellor George Osborne announced a tough government spending review designed to cut the size of the UK’s structural budget deficit and bring down managed state sector spending as a share of GDP. The UK is not alone in introducing fiscal austerity measures and they have prompted fierce debate not least among economists about the likely impact on economic performance. The spending squeeze brings to an end more than a decade of strong real terms increases in state spending.
This question is really about causation and in this case we are asked to think about how the steep planned cuts in government spending may affect the annual rate of consumer price inflation in the next couple of years.
read more...»Q&A: What do we need to know about output gaps?
Q&A: For AS macroeconomics, what do we need to know about output gaps?
read more...»Q&A: Does a positive output gap always mean rising inflation?
A student asks “Does a positive output gap always mean rising inflation?”
read more...»Q&A: Size of State Sector and Automatic Stabilisers
A student asks: “how does having a large state sector allow automatic stabilizers to act in a downturn?”
read more...»Q&A: What is hedging?
Hedging is the process of protecting oneself against risk.
read more...»Q&A: Current and Capital Account
Q: Please explain the difference between the current and the capital account on the balance of payments
read more...»Q&A: AD and Inflationary Pressures
A student asks: Will a rise in AD will only cause cost-push inflation if there is a positive output gap?
read more...»Q&A: What is the productivity gap?
The productivity gap is a phrase to describe a sustained difference in measured output per worker (or GDP per person employed) between one country and another.
read more...»Q&A: Demerit Goods and Negative Production Externalities
Question: I was wondering what the difference between a demerit good and a good that has negative externalities in production was?
read more...»Q&A: How the PFF might be used in assessing a country’s economic performance
A production possibility frontier (PPF) is a boundary which shows the combinations of two or more goods and services that can be produced whilst using all available factor resources efficiently.
read more...»Q&A: Changes in pattern of national output
A student posts this question:
Sectoral contribution to the national income and employment have changed over a period. Explain in context of structural changes in economy.
Thanks for just posting an exam question! How imaginative! Briefly here are my thoughts:
read more...»Q&A: Why do cartels often collapse?
Recent business history both here in the UK and in international markets is littered with examples of cartel-behaviour by businesses that seem to have come unstuck. Just type price-fixing into Google news and see what comes up! Even on the day I am writing this blog answer, the FT reports that three cargo airlines have agreed to pay fines totalling $214m for their roles in a global conspiracy to fix prices for air freight. Bloomberg reports that a former sales executive at Hitachi Displays Ltd. has been charged with participating in a global conspiracy to fix prices for liquid crystal displays sold to Dell Inc. And in Ireland, a former director of a Dublin car company has been given a 15-month suspended prison sentence and fined €160,000 after pleading guilty to charges of price-fixing.
read more...»Q&A: Are there countries not in recession this year?
The simple answer is yes! Although the world economy is forecast to experience a recession this year (Deutsche Bank have pencilled in a 1.9% contraction in global GDP for 2009 and the G7 nations will see output slump by 4.5%), there will always be countries at different stages of the business cycle and those who for one reason or another manage to avoid the worst of the fall out from the global financial and economic crisis. Using forecasts for 2009 from the economics team at Deutsche Bank here are some of the countries expected to avoid a full-blown recession:
read more...»Q&A: What is a scrappage subsidy and will it work in the UK?
A scrappage subsidy is a “pay-to-scrap” scheme where a government offers a financial incentive to car buyers if they scrap a car that has reached a specified age and in its place they are offered a payment towards the cost of a new vehicle. Germany and France both offer scrappage subsidies to consumers and there is a growing number of voices from inside the UK business community and motor vehicle industry clamouring for one to be launched in the UK. The Retail Motor Industry Federation and the Society of Motor Manufacturers and Traders (SMMT) are at the head of the queue lobbying for a scrappage scheme to be introduced as soon as possible.
read more...»Q&A: What is fiscal retrenchment?
Fiscal retrenchment means that a government has to introduce deflationary fiscal measures designed to reduce the amount of borrowing and debt that has been run up during the downturn and economic/financial crisis.
read more...»Q&A: Which indirect taxes give the government to most revenue?
Which indirect taxes give the government to most revenue?
For the UK government value added tax provides the biggest source of revenue. In November 2008, VAT was cut from 17.5% to 15% on a temporary basis in a move by the government designed to stimulate consumer spending – the decision was said to be worth around £12 billion of lost tax revenue for the UK Treasury.
There are many other indirect taxes and our chart below highlights six of them. As you can see the flow of tax revenue from indirect taxes on tobacco provides a very important source of money for the UK government. Together these six indirect taxes add nearly £20 billion annually into the government’s coffers.
In a recession where consumer spending is falling and where there is a chance of a period of persistent price deflation, the UK government will see a fall in revenue from indirect taxes.
