Get Summer 2014 Right First Time with tutor2u Exam Coaching & Revision Workshops
This is a one page revision sheet covering some of the key data on the state of the UK economy - I hope it might be useful for students taking their mock exams in macroeconomics. There was also an excellent feature on prospects for the UK here - Is Britain's economy really on the path to prosperity? (Observer, 1st December 2013)read more...»
The Tutor2u slideshare channel has just notched up over a million hits and we continue to add new resources each week. Here is the link to the site.
The Third Plenum has finished in China and with it has come some potentially significant reforms designed to rebalance the Chinese economy and shape future growth and development. The BBC's Linda Yueh has been prominent in reporting on this crucial stage of Chinese development and we have linked below to some of her recent output broadcast on the BBC.read more...»
An initial change in aggregate demand can have a much greater final impact on the level of equilibrium national income. This is known as the multiplier effect
It comes about because injections of new demand for goods and services into the circular flow of income stimulate further rounds of spending – in other words “one person’s spending is another’s income." This can lead to a bigger eventual effect on output and employmentread more...»
Long term youth unemployment is a persistent structural problem for the British economy - this BBC news article provides a ray of hope as Nestle announces extra investment in their training / apprenticeships schemes for younger workers. A more pro-active approach from larger businesses would be welcome - offering paid experience to help break the catch-22 of no job without experience, no experience without a job. Nearly one million young people (16-24) are unemployed in the UK, while youth unemployment in Ireland is 28 per cent with more than 65,000 young people out of work.read more...»
Here is a thoroughly updated (20123) 94-slide revision presentation on aspects of fiscal policy - designed for student and teachers taking the AS macro paper.read more...»
UK immigrants who arrived since 2000 are less likely to receive benefits and less likely to live in social housing than UK natives. What’s more, over the decade from 2001 to 2011, they made a considerable positive net contribution to the UK’s fiscal system, and thus helped to relieve the fiscal burden on UK-born workers.
The positive contribution is particularly evident for UK immigrants from the European Economic Area (EEA – the European Union plus three small neighbours): they contributed about 34% more in taxes than they received in benefits over the period 2001-11.
These are the central findings of a comprehensive analysis of the fiscal consequences of immigration to the UK, published today by the Centre for Research and Analysis of Migration (CReAM) at University College London.read more...»
The Confederation of British Industry has today launched a report called Our Global Future: The Business Vision for a Reformed EU - The report calls for further EU reform not least the completion of the single market in particular in services and the new internet economy. They argue for more free trade deals with other countries and regions.
The report produces estimates – based on past academic studies – that EU membership adds £62bn-£78bn a year to UK gross domestic product, equal to the combined economies of northeast England and Northern Ireland. That works out at £3,000 per household and £1,225 per individual. The fact sheets from the report can be found hereread more...»
BBC Newsnight explores the latest UK growth data and holds a discussion about the durability and nature of the upturn in economic fortunes. Excellent background for evaluating this crucial stage of the cycle.read more...»
The nature of A2 economics specifications is that they lag interesting and important developments in the subject much of which are directly relevant to what students are taught in the classroom. The role of complexity in understanding how and why countries grow is one such example and I have blogged before about the work of Cesar Hidalgo and Richard Hausmann through the Observatory of Economic Complexity - see "Teaching Trade in a Different Way"
It is a joy to find the Financial Times covering some of their ideas in a brace of short videos as part of the John Authers Daily Note. You can always find these clips on the FT's You Tube Channel and I strongly recommend this for ambitious and enthusiastic students.read more...»
Here is a set of ten charts on aspects of the UK economic cycle and growth story for recent years - designed as a possible teaching / handout resource for teachers on an AS macro courseread more...»
Key changes in the labour market are important in understanding developments in the British economy. Here is a selection of ten updated charts on unemployment designed as a teaching resource for colleagues covering the Unit 2 macro course. Also available for download as a pdf file.read more...»
If you are teaching inflation as part of the AS macro course, here are ten charts that focus on recent changes in the consumer price index and related inflation measures. Useful perhaps as handouts for class discussion and annotation. You can download the charts as a pdf file.read more...»
This is an updated revision presentation covering some of the factors that determine short run aggregate supply (SRAS) in an economy. Click here to take a quick revision quiz on short run aggregate supply.read more...»
This is an updated revision presentation on aggregate demand in the UK economy - designed for AS macro students. Revision notes on aggregate demand can be found here. Click here to take a revision quiz on aggregate demand.read more...»
The dates and locations for our popular programme of exam technique coaching & revision workshops to prepare AS & A2 Economics students for exams in May & June 2014. The details are listed below together with important information about changes in way that bookings are processed.
Please note that for summer 2014 we are taking confirmed bookings only. Places are allocated on a strictly first-confirmed basis. Once each screen capacity is filled, the event is full and no further bookings can be accepted. Our overall capacity is lower than in previous years and we fully expect each workshop to be fully booked before the Christmas break - so please contact us early to ensure that your students can attend!read more...»
Inequality has been rising for 30 years. The gap between rich and poor is the widest since the second world war. If current trends continue, we will have reached Victorian levels of inequality in 20 yearsread more...»
The cost of living will be a key battleground in the next election and the main political parties seem to be coming up with offers covering utility bills, rail fares, banking charges and the cost of housing as a way of limiting increases in the living costs of "hard-working" families! One should always take promises from politicians with a huge pinch of salt - intervention to freeze bills is fraught with risks and unintended consequences. This Channel 4 news clip looks at the issue.read more...»
Changes to key interest rates by central banks have a significant impact on economic activity during periods when the economy is expanding. Unfortunately, they seem to have virtually no effect during recessions – the time when the stimulus of monetary policy is most needed.
These are the central findings of research by Professor Silvana Tenreyro and Gregory Thwaites, published by the new Centre for Macroeconomics at the London School of Economics.read more...»
Here are some video resources on Shanghai's new tree trade zone. The Financial Times reports that "The Chinese government has declared that it wants to use the zone – a small 28 sq km sliver of Shanghai – as a test bed for policies from interest rate liberalisation to capital account opening - There are no residents in the zone – only offices, factories and hotels" There is much debate about whether the creation of a new free trade zone will bring about greater digital freedom in China - allowing for example, freer access to social networks such as Facebook and Twitterread more...»
Most of us are keen to see the economy grow – as measured by GDP – and in the short run, the most likely driver of growth will be aggregate demand (AD). But which component of AD do we want to grow the most?read more...»
Mobile phones have changed how we negotiate our relationships with family, spouses and close friends. Increased levels of mobile phone subscriptions are linked with improvements in education, gender equality and political participation, particularly in developing countries. They are also associated with higher economic growth.read more...»
Here at Tutor2u we are really looking forward to the launch of a new programme on BBC - Talking Business with Linda Yueh. Linda has spoken at several of our Tutor2u events in recent years and her ability to communicate important and often complex ideas to a wider public has been clearly evident in her presentations. This is a programme well worth tuning into and sharing with your students. Click here for details. See also: China's Transformation - The Long View (Linda Yueh at the Tutor2u Conference)
The presentation below provides our latest perspectives on developments in the UK economy.read more...»
Today in class we were discussing the forces of globalisation, and some of the discussion took us down the following route:
Globalisation is defined in many different ways – there is no textbook definition - but economic globalisation is usually characterised by some of the following features:
- An increasing interdependence between economies and an erosion of national boundaries
- Increased cross-border activity from MNCs
- Increased cross-border flow of trade in goods and services, movement of people, flows of financial assets, hot money, and FDI flows
- The growth of labour migration and outsourcing and global supply chains
The OECD’s definition is: “The geographic dispersion of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets”
One index that attempts to quantify and measure globalisation is called the KOF index.
-The KOF Index of Globalization measures the three main dimensions of globalization:
Economic, Social and Political.
As soon as students encounter the idea of GDP they are guided towards thinking about the possible drawbacks to growth, especially for the environment.read more...»
The Ethiopian government is ploughing up to 15% of her GDP into large-scale infrastructure development projects - will this kick start a renewed period of fast growth and development? The Grand Ethiopian Renaissance Dam will be the largest hydroelectric power plant in Africa when completed, delivering 6,000MW. The cost and the potential impact of diverting the Blue Nile have created controversy in the region. This FT video looks at some of the issues. This BBC news resource is also useful: The dam that divides Ethiopiansread more...»
The rate of unemployment in Greece has reached a record of just under 28% of the labour force. To put this into context, in 2008 just before the Global Financial Crisis engulfed much of the EU economy in recession, Greek unemployment was 7.8% (equivalent to where the UK jobless rate is today). Youth unemployment is staggeringly high - the latest figures show that 58.8% of people under the age of 25 are out of work.
There are some tentative signs that the Greek economy may be at a turning point from the trough of a deep and persistent depression. After six years of full-blown recession some macro indicators suggest that confidence is seeping back for businesses and consumers and that the government debt crisis might ease a little. Tourism, which accounts for about a fifth of Greece's economic output and one in five jobs is having a strong year - tourism exports represent an injection in the Greek economy's circular flow of income and spending. Chinese tourists seem to be coming to Greece in much greater numbers!
But Greece has suffered gravely over the last few years - the level of real GDP is 25% lower than it was before the crisis and some economists have started to refer to Greece as a sub-merging economy whose trend growth rate is now negative.read more...»
This revision presentation helps students develop their understanding of the Circular Flow of Income & Spending. It builds the circular flow step-by-step and then provides examples of the circular flow in action. An essential revision presentation for a core macroeconomic concept.read more...»
With a deep recession and persistently high rates of unemployment among younger people. fears are growing about a brain drain in Portugal as highly qualified university graduates leave the country in search of a better life. Peter Wise, Financial Times Lisbon correspondent, reports on what the trend means for the troubled Portuguese economy. Losing "the best of a generation" poses important long-term threats to the competitiveness of the Portuguese economy. Some are moving to Angola and Brazil, the UK has also attracted skilled workers in health care, banking and IT.read more...»
India is Asia's third largest economy but it is experiencing an economic slowdown with the rate of economic growth dipping to the lowest level in more than a decade.
The economy is suffering from a persistent trade deficit (worsened by a fall in exports), together with high rates of inflation and a sharply depreciating currency (the rupee). Billions of dollars of currency have been taken out of the economy by worried investors - this is known as capital flight.
Consumer demand for goods and services is being hit by rising prices as the cost of imports surges and other prices head higher too. Onion prices for example have more than trebled.
This BBC news video looks at the weakening of economic growth in India. Can India put in place economic reforms and policies to return the economy to the growth rate needed to sustain the improvement in living standards that has occurred since the early 1990s?read more...»
Why is economic growth such a rare and elusive butterfly in the UK garden? What institutions and policies are needed to sustain UK economic growth in the dynamic global economy of the twenty-first century?read more...»
SOME people are never satisfied. The evidence is mounting that the UK economy is now on the path to recovery. But to those who denied the possibility of any economic revival at all under the policies of “austerity”, this is simply not good enough. It is the wrong kind of recovery, they say. Fuelled by debt-based personal spending, unsustainable house prices, another crash, the doom-mongering litany more or less writes itself.read more...»
Britain's exports of whisky have been growing strongly in recent years helped by a lower pound and fast-rising demand from whisky drinkers in emerging markets. Whisky exports set to rise to £4.5bn by 2017 even though sales to traditionally strong markets in the European Union have stalled because of persistent recession in countries such as Spain, Portugal and Italy. This Channel 4 news report looks at the experiences of two whisky producers - one a small-scale manufacturer and the other the giant Diageo to consider prospects for UK exports as a way of strengthening the recovery,read more...»
A few weeks ago, I was relaxing in the departure lounge of Auckland airport waiting for a delayed flight when I overheard a robust conversation between two fellow travellers dissecting the recent books of Tim Harford. One of them wondered when Tim's writing would next hit the airport bookshelves? In my holdall I was carrying a pre-publication version of The Undercover Economist Strikes Back: How to Run or Ruin an Economy and, after several minutes, I could contain myself no longer. "Don't worry" I interrupted "a new book from Tim is out soon and it is all about macroeconomics."read more...»
How sticky is unemployment? Will it take three years to fall?
The views expressed by the new Bank of England Governor, Mark Carney, on interest rates and unemployment remain a hot topic. Interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years.read more...»
For years, a mystery has baffled visitors to developing countries: Coca-Cola is everywhere, but basic medicines are not. This year, Zambia has become the first African country to embrace a trial of the ColaLife concept. ColaLife aims to use Coca-Cola’s distribution model to deliver life-saving medicines to far-flung, rural communitiesread more...»
This is a simply fabulous video to show to economics students of whatever vintage - there is so much relevant stuff in here it would struggle to fit into one of the containers that fill the world's largest ever freight ships. Challenge your students to find as much economics in this as possible and then make some connections between the topics!read more...»
The new Governor of the Bank of England, Mark Carney, said last week that interest rates will not be raised until unemployment falls below 7 per cent, a process he thinks will take three years. The battle of Austerlitz in 1805 was one of Napoleon’s greatest victories, leading to his complete domination of Continental Europe. In the aftermath, the Prime Minister, Pitt, famously pronounced ‘Roll up that map of Europe, it will not be wanted these next ten years’.read more...»
The United States is making changes to the way that it calculate the value of their national output and the result is that the total value of the goods and services produced in the world's biggest economy will be substantially higher as a result. According to this article from BBC news "The way the US economy is measured has changed, to include the amount spent on intellectual property outlays such as pop song production and drug patents for the first time." Check out this short dynamic chart from the Economist for more background details. The gain in GDP is 3.5% or - in effect - a country the size of Sweden has been created by changing the scope of the GDP measurement!
The Governor of the Bank of England has announced a change in the handling of monetary policy for the UK economy. Although the inflation target remains the same (CPI inflation of 2%) and the Bank remains committed to maintaining price stability as their main macroeconomic objective, they have decided to introduce forward guidance in the setting of policy interest rates. This takes the Bank of England closer to the approach to setting interest rates taken by the United States Federal Reserve.
Download this chart
What is forward guidance?
Forward guidance means that interest rates will stay at their historic low level of 0.5 per cent and monetary policy in general will remain expansionary until the unemployment falls below seven per cent. More here from the BBC news website.
However, that link could be put aside if the inflation rate threatens to rise above 2.5% in the medium term. Another wind-check to this system is that if the Financial Policy Committee judges that the UK economy is in danger of experiencing another credit boom then the Monetary Policy Committee will also re-visit their decisions on interest rates.
According to Ed Conway from Sky News "The UK inflation target remains in place - in theory - but in practice it has become significantly less important." Developments in the labour market and real output growth are likely to become more significant in helping to shape the future path of policy interest rates and whether monetary policy is expansionary, contractionary or neutral in its effects on the wider economy.
Sky news - Forward Guidance, a Monetary Policy Gamble
Anatole Kaletsky (Reuters): Carney at the Bank of England confirms the end of monetarism and return of neo-Keynesian demand management
With the unemployment rate currently at 7.8% of the labour force and predictions from the Bank that the jobless rate may take between two to three years to drop to the 7% way-marker, we can expect the period of exceptionally low monetary policy interest rates to remain with us well into 2015 and possibly 2016. This is not good news for savers struggling to find any kind of interest rate that at least matches the current rate of CPI inflation.
Governor Carney's response to this is to argue that what the economy needs most is a return to growth - in his words an economy growing sufficiently quickly to achieve "escape velocity". The current recovery has been the weakest for decades and real GDP remains below the peak achieved before the Global Financial Crisis took hold.read more...»
The UK Energy and Climate Change Committee has stated that shale gas will not be a "game changer" in the future of UK energy, but they are wrong; it will be. The recent British Geological Survey report pointed to 1,300 trillion cubic feet of reserves, twice previous estimates. A recent study by the Institute of Directors found that the shale gas industry could generate 74,000 jobs and could supply up to half the country’s gas needs by 2030. Furthermore it could also trigger an investment boom worth £3.7 billion a year. Given the location of most of the reserves, it could also be hugely beneficial in reducing the north-south economic divide.read more...»
Several news sources are quoting a new report from the Chartered Institute of Personnel and Development (CIPD) which estimates that as many 1 million people are on zero-hours contracts in the UK. For a summary of the report go to this link to see the CIPD version.
Zero-hours contracts are those where an employer gives no guarantees about the amount of hours an employee may work in any given period. In effect, the employee waits to find out how many hours they may be required and generally does not earn anything if they do not work. Whilst the zero-hours contract are controversial (trade unions are generally opposed and even Vince Cable is investigating their use), the CIPD report suggests that only about 14% of employees on these types of contracts do not earn a living wage.
The UK's approach to part-time, flexible and non-contract employment is often quoted as one of the reasons why unemployment figures have not matched those of previous recessions in the UK - someone on zero-hours contracts may not be classified as unemployed even if they do not work. A relatively large proportion of workers in the UK are working part-time would rather work full-time but have less choice in the current job market.
Fascinatingly, the Education sector is now one of the biggest users of zero hours contracts (approximately 35% of education establishments have at least one person employed using the method).read more...»
There has been renewed focus in recent weeks on the slowing growth rates in the BRIC countries - Brazil, Russia, India and China. It is inevitable that the pace and sources of growth will change as these countries develop and experience continued structural adjustments. How successful will they be in responding the the challenges and opportunities of the next stage of development? In this blog we link to some recent articles on the BRIC countries for students wanting to deepen their understanding of this important area of the A2 macro course.read more...»
Potential defaults in the Euro zone have been in the news again. In Portugal, the ruling coalition parties and the main opposition Socialists have been unable to agree on a European Union-led bailout plan after days of talks. Yields on the country’s 10 year bonds have approached 7 per cent, compared to the 1.5 per cent in Germany. There has been some improvement this week on the news that an early general election has been avoided, but yields still remain over 6 per cent.read more...»
What effects does the rapid growth and development of the Chinese economy have on the prices we pay in the UK for different goods and services. This short video from the Bank of England looks at some research into the impact of China on our own consumer price index. It is good for deepening your understanding of the inter-connections between the two economies.read more...»
Access to affordable comprehensive child care and schooling is widely regarded as being crucial to improving the incentives for mothers to actively search for and take paid work. Effective early years education also has a long run positive effect on employment prospects and is important as part of the overall supply-side capacity of the economy.read more...»
In its annual assessment of the U.K. economy, the IMF called on the UK to invest in skills and infrastructure and increase banking sector competition in order to foster growth and achieve a sustainable recovery.
The report can be found here and contains plenty of relevant background information on the current situation facing the UK - here is a selection of quotes from their summary
The UK Coalition government has introduced a controversial welfare cap - imposing a maximum on the total social security spending per year for each family. The welfare cap limits households to £26,000 a year. Couples and single parents receive no more than £500 a week in benefits, while the limit for single people is £350, although there are some exemptions.
The cap is designed to ensure that benefits payments do not exceed the income of the average working household and is designed both to cut total welfare spending and as part of a strategy of improving incentives for people to actively look for and take paid work.
Critics argue that a welfare gap does little or nothing to address deeper underlying problems such as the soaring cost of renting property and the lack of affordable child care.
Social spending varies greatly across different countries. The Economist live chart below looks at some of these differences.read more...»
They dominate the major championships in long distance events and the standard of their running is so high that several runners have opted to compete for other countries in order to gain selection for World and Olympic events. What makes Kenyan distance runners so good? From where have they established their enduring competitive advantage? Are there parallels and lessons for countries wishing to compete in the global economy? This news feature from the Guardian offers some interesting clues!read more...»