Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK
Our focus in an AS macro revision session was on the difference between cyclical issues and events and the wider / deeper structural problems and issues facing the UK economy at this fascinating time. Key macro policy decisions affect the path of an economy out of recession, but are these the same policies that will address the supply-side constraints and weaknesses that hold back growth, development and contribute to growing inequality?
read more...»Unit 2 Macro: Evaluation on Supply-Side Policies
Lots of students will be revising the economics of supply-side policies this week with their AS macro paper coming into view. There are different interpretations of what constitutes a supply-side policy measure. I like to label SSP (supply-side policy) to any policy or group of measures where emphasis is given to improving the working of markets, raising factor efficiency, improving the quantity and quality of labour and in lifting the capacity and competitiveness of an economy in a constantly-changing international environment.
Many supply side policies focus on improving incentives and outcomes in the labour market, others are geared towards bettering the performance of markets for goods and services, All of them centre on helping to sustain non-inflationary growth, improve trade performance, lift living standards and create new and fulfilling jobs opportunities.
This revision blog looks in particular at some evaluation points on supply-side approaches:
read more...»Improving Evaluation Skills in Economics Exams
Here is an updated version of the WEESTEPS approach to economics evaluation designed to boost the evaluation scores and exam results for AS and A2 students. Paul Bridges is the mastermind behind this superb approach to evaluation - it gives you some great pointers about the evaluative approaches that can be used. Works well for micro and macro - but particularly when you have to evaluate a specific policy intervention in a market / industry / or a macro policy discussion.
read more...»Eurozone Crisis - Lessons Learnt
Last week I attended a very interesting lecture at the LSE on the Eurozone crisis, given by Leszek Balcerowicz, a Polish economist who is former chairman of the National Bank of Poland and Deputy Prime Minister.
The following blog outlines his thoughts, but also includes useful links to articles to read.
Using the crisis as a case study will hugely benefit A2 students as it encompasses many of the topics covered in the syllabus.
Grexit - Andrew Balls on Greece and the Euro
Following on from Ben Christopher’s article, a BBC Radio 4 interview with Andrew Balls, an investment fund manager, and younger brother of The Shadow Chancellor on the possibility of a Grexit - Greek exit from the Euro.
read more...»Unit 2 Macro: Government Spending
Government spending (or public spending) and in Britain, it takes up nearly half of our annual GDP. Spending by the public sector can be broken down into three main areas:
read more...»Unit 4 Macro: Fiscal Policy Revision Charts
This PowerPoint contains four fiscal policy charts for the UK - I have been using them in a revision session this morning. I will blog a little bit more about them later on
Unit 2 Macro: Fiscal Policy Glossary
A selection of economic terms linked to government fiscal policy
read more...»Unit 2 Macro: Economic Cycle Glossary
A short glossary of key terms connected to the economic cycle
read more...»Austerity - Portuguese experience
Those who are interested in the ‘austerity’ title for the RES essay competition might find this article on the BBC website useful. Today there is a general strike planned in Portugal, in protest against the country’s austerity measures. Portugal’s three main parties all voted in favour of stringent austerity measures for the country. The new government, voted in last summer, has privatised several industries, cut public sector wages and raised taxes, including VAT. They have been praised by Brussels for their approach, and the latest government estimate put its budget deficit for 2011 at close to 4% of GDP, well below the official target of 5.9%. In this interesting piece of writing, many different perspectives are offered of the effects of these measures, ranging from an increase in bad behaviour in schools to an increase in home-grown vegetables.
Budget 2012 - analysis with evidence
As ever, there are loads of sources that students can use to analyse the Budget and to extract pieces of Evidence for the Examples they will need to add depth to their analysis in essays. Those who are attending the current round of revision workshops will recognise this as a key part of ensuring that they write essays which PEEL the answer (each paragraph makes one Point, using Examples with Evidence, offering Evaluation and Linking to the question). As start points, I would suggest these sources which are reasonably free of opinions:
BBC website: Budget 2012 at a glance, Farewell 50p tax rate, and Over 65-s tax-free income freeze
The Guardian Budget 2012: welfare cuts, tax cuts too, but retreat on child benefit and for the visual learners a nice graphic version: Tax and spending plans visualised
Where does my money go?
It will be interesting to receive my personal statement spelling out exactly how much of my income is paid to the state and what it is being spent on! However for those wanting this information sooner than this, there is a great resource from the Guardian data team which shows you, on a sliding scale, exactly how much direct taxation you pay on your income and specifically where that money is spent.
This is an excellent resource for fiscal policy and useful to start debates about how and why the UK taxpayer is taxed and where the government should be spending the revenue received. There is no doubt that following Wednesday’s budget, the role of fiscal policy will take centre stage in Economics classrooms up and down the country - keep your eye out for some top analysis in the media over the next few days.
Unit 1 Micro: Government launches New Buy Loan Guarantee Scheme
Here is a fresh attempt by the British government to breathe life into the moribund housing market. People in England are being offered financial help to climb onto or up the housing ladder as the government’s new mortgage indemnity scheme launches. Under the terms of the scheme, both the construction industry and taxpayers will act as co-guarantors on new homes bought by existing or first-time buyers. Will it work in boosting demand for new build homes? Is this scheme designed to help house-buyers or builders? Or is there a real risk of government failure?
Basics:
* Builders will pay 3.5 per cent of the price of the home
* Taxpayers will provide an additional guarantee of 5.5 per cent that will only be used if there is a major property crash.
* Mortgage lenders will be able to lend up to 95 per cent of the sale price which means new buyers in many instances will only need to find a five per cent deposit or £10,000 on a new £200,000 home. The typical deposit on a mortgage now is closer to £36,000
* The scheme is available on houses and flats valued under £500,000 in England only
Unit 2 Macro: Policies to Drive Economic Recovery
We were looking today in AS macro at the policy options being considered as part of a strategy to drive a stronger recovery in demand, output, jobs and investment in the UK economy.
I am trying to encourage my students to put things into context as soon as possible in their longer essay-style questions. Here are some thoughts on a question on policies designed to bolster growth:
read more...»Unit 2 Macro: Targeted Tax Cuts to help the Economy
The Confederation of British Industry is a lobbying organisation and seeks to promote and protect the interest of many of the UK’s leading businesses across manufacturing and services. Ahead of the March Budget, their head John Cridland argues in this video for a series of targeted tax cuts as a stimulus for the economy. This is worth watching to get a feel for what are the priorities of business at this stage of the cycle. How much different would it be if the interviewee was representing the trade unions?
read more...»Petrol, tax, and the downward sloping demand curve.
Nearly every country has a tax on petrol, although the amount varies widely. And given that the landed price of petrol is quite similar (see the graph below), it can be seen what effect the tax has on quantity demanded. The results are very much in line what economic theory would predict and there are also clear implications for countries that want to reduce petrol consumption.
read more...»Unit 4 Macro: Economics of Fiscal Deficit Reduction
How far, how fast and in what way should the UK government seek to cut the annual budget deficit and improve the state of public sector finances? These questions continue to be at the centre of a fierce debate among economists.
read more...»Unit 4 Macro: UK Bond Yields Reach Record Lows
The yields on UK government issued bonds has been falling steadily in recent months and, as we turned into January 2012, the yield on ten year government debt edged below 2% - when the UK government continues to borrow eye-wateringly large sums, why are bond yields so low?
The yield on a bond is the income received from a fixed-interest bond, calculated as a percentage of the price paid for it. So a ten year bond bought for £10,000 and paying a fixed annual interest of £600 would offer a yield of £600 / £10,000 = 6.0% per annum.
If the market price of a bond rises - for example, it rises from £10,000 to £12,000, the fixed interest remains the same (£600) but the yield will fall. £600 / £12,000 expressed as a percentage = 5%.
read more...»Analysis of the Autumn Statement
AS level students who have studied AD, AS and macroeconomic equilibrium should be in a position to carry out an economic analysis of today’s Autumn Statement. Here is a suggested assignment, which borrows from the focus on ‘connectives’ in the Business Workshops this week to help to build a strong chain of argument.
read more...»Ten Things About Tax
Over a month ago I highlighted a resource from the guardian visualising where government spending had been allocated in the last financial year and these figures can be updated for the planned 2011-2012 spending through the HM Treasury website
read more...»Economist’s Interactive guide to government debt
Great interactive app form the Economist and very apt at time when levels of national debt are constraining economic policy choices and threatening the viability of the Eurozone
Unit 2 Macro: Analysing Government Spending Cuts
It is rare that a day would go by without you being able to find a news article on issues that affect the macro-economy; a good tip is to constantly think like an economist and analyse these issues as you may do in the exam.
read more...»The morality of taxation
Morally, does it matter how rich the rich are? Or should our real concern be how poor the poor are? There was a great edition of The Moral Maze on Radio 4 last night, with debate sparked by the growing lobby calling for the 50% rate of income tax to be cut. The programme is available on i-player here, and it is really worth spending 43 minutes to listen to it - perhaps as preparation for a classroom debate.
Apple is richer than the US Government!
Yes- it’s true! Read on to find out more about this incredible statistic.
read more...»What might happen on August 2nd?
Well- it’s the day the United States might go bankrupt! Read on to find out more and for links to some useful resources to aid a class discussion of this fascinating topic.
read more...»A2 Macro: Twin Deficits
Here is a revision note on the economics of twin deficits. Twin deficits refer to a situation where an economy is running both a fiscal deficit and also a deficit on the current account of the balance of payments. The revision note is available for download as a pdf file.
Twin_Deficits.pdf
AS Macro Key Term: Fiscal Austerity
Fiscal austerity is a term in common use in the media at the moment. It refers to decisions by a government to reduce the amount of government borrowing (i.e. cut the size of a fiscal deficit) over a period of years. Fiscal austerity normally involves a combination of measures including increases in the overall burden of taxation and cuts in either the real level or growth of government spending on state-provided goods and services.
Fiscal austerity is in the news in the UK because of the Coalition Government’s plans top eliminate the structural budget deficit over the course of the current Parliament. In their Coaltion document they claim that:
1/ We will accelerate the reduction of the structural budget deficit over the course of a Parliament
2/ The main burden of the budget deficit reduction will be from reduced spending rather than increased taxes.
AS Macro Key Term: Fiscal Deficit
The fiscal deficit (or the budget deficit) is the amount by which government spending on state provided goods & services, transfers and capital spending exceeds income from taxation. A fiscal deficit must be financed usually by the issue of new government debt. Data for the UK’s fiscal deficit is shown in the following charts. The UK Coalition government has set an ambitious (and controversial) target to eliminate the structural element of the fiscal deficit over the course of the next four years.
The first chart below tracks UK government borrowing as a share of GDP
read more...»Discrimination and distribution of income news resources
If you are nearing the end of an A2 microeconomics syllabus and looking for current resources to help with issues of distribution of income and discrimination, the BBC came up with a couple of helpful items yesterday.
read more...»Dambisa Moyo - How the West was Lost
Dambisa Moyo’s talk at the RSA available here focuses on some of the long term structural problems facing Western Economies in general and the USA in particular. She argues that there are three crucial ingredients in economic growth - better capital, the quantity and quality of the workforce plus improvements in productivity
read more...»
