The Story of ‘Adam Sugar’ (aka Aggregate Supply)
This is a great activity my HoD Luke McIlvenna did today with our mutual Lower Sixth Economics Class, which helped them to develop and demonstrate their understanding of aggregate supply.
read more...»Unit 2 Macro: China’s Trade Engine is Spluttering
New data suggests that the rapid growth of exports from China is once again slowing down. This Reuters business news video (2 minutes) provides some useful background information on the recent downturn in export and import volumes and mentions that rising imports and a shrinking trade surplus may help the Chinese to rebalance their economy and perhaps provide a demand stimulus for exporters from struggling European countries.
That said the continued weakness of many EU countries will make it difficult for Chinese exporters to maintain sales and employment. During the global recession of 2008-09 millions of workers in Chinese manufacturing industry lost their jobs prompting many to return to their rural homelands in search of work and income.
* Which industries in China are likely to be most affected by a reduction in the growth of exports?
read more...»Stephanie Flanders explains Quantitative Easing in 60 seconds
This has to be amongst the best 60 seconds of Economics you’ll ever see on television. The superb Stephanie Flanders takes a leaf out of the RSA playbook to explain the basic theory behind quantitative easing. Wonderful!!
read more...»Unit 3 Micro: Richard Wilkinson on Inequality and Economic Harm
I have been using this talk given at TED 2011 by Richard Wilkinson when teaching the topic of poverty and inequality and the risks that a growing chasm between low and high income groups can have for society and economic performance. Students and teachers familiar with the work of Pickett and Wilkinson and their recent book “The Spirit Level” will know well the approach that these authors take.
They use published data on inequality and link to wide differences in a range of economic and social outcomes. Their work has been criticised by many on the right, not least because their argument is strong and clear - namely that we need to reduce inequality to tackle some of society’s deepest and most corrosive problems.
read more...»Unit 2 Macro:Video Resources on Human Development Data
Here is a short collection of short video resources on measuring human development with specific reference to the annual human development report and to progress in improving welfare in countries such as Kenya and Brazil
read more...»Unit 2 Macro: Growth and Development - Some Indicators
The dictionary definition of ‘development’ is to improve, to progress, or to grow – but development is not just about growth! It is concerned with the improvement of human welfare within an economy, and so it encompasses concepts such as the standard of living, cultural identity and political freedom.
read more...»Unit 2 Macro: Signs of Progress for Zimbabwe
Just a few years ago the Zimbabwean economy was in collapse and meltdown and the political system on the point of disintegration under the disastrous handling of the dictator Robert Mugabe. When hyperinflation ruled, a sign once appeared in the toilets of a hotel in Harare, “please do not flush Zimbabwean dollars down the toilets”
Three years since the creation of a coalition government, there are some tentative but notable signs of improvement. Inflation has fallen and the use of the US dollar and other regional currencies as legal tender has helped to finance essential imports of basic products. Unemployment remains above 75% of the labour force and there is huge absolute poverty, but the glimmers of hope are there as shown by this recent news report from AlJazeerah English.
read more...»The impact of interest rates
The US economy may have grown at nearly 3% in the last quarter of 2011, but the Federal Reserve announced last week that they do not expect to raise interest rates until the end of 2014. It has cut its growth forecast for 2012 from 2.5-2.9%, to 2-2.7%, and says that the economy faced “significant downside risks” and that it “expects to maintain a highly accommodative stance for monetary policy” - which I take to mean expansionary.
This article about that interest rate decision is useful for economics teachers and students as it highlights a couple of results of that announcement; firstly that the dollar’s exchange rate immediately lost value as the interest rate made the US a less attractive place to keep cash, and secondly that government benefited as the cost of its borrowing in markets for 10 years fell from 2.06% to 1.94%, as traders priced in the lower medium-term interest rate expectations.
Unit 2 Macro: The Economic Disaster of Youth Unemployment
The official figures show that there are now more than one million young people counted as unemployed in the UK although the precise scale of the jobless crisis is difficult to measure accurately. Nonetheless, it represents a fundamental economic, social and political problem and one that policy makers must address.
In this video report from Al Jazeerah, Lawrence Lee visits Leeds to find a well qualified nineteen year old with good qualifications but who cannot afford to go to university and is finding it tough to win a place in the police force - his main ambition.
read more...»Unit 2 Macro: Focus on China - Trade and Growth
Export demand can be an important driver of growth and development. For many years China has practiced export-led growth with exports accounting for over 40% of GDP. China ran a trade surplus with the rest of the world of around of $200 billion in 2009 – this looks huge, but is fairly modest as a share of GDP. The surplus on the balance of payment current account has diminished from over 10% of GDP in 2007 to less than 6% in each of 2010 and 2011. But China still has a structural trade / BoP surplus.
read more...»Unit 2 Macro: Focus on China - Inflation
The super-charged growth in China has brought about a rise in inflationary pressures and is a good example of the possible conflicts between rapid economic expansion and rising costs and prices. The Chinese government’s inflation target is 4% but inflation is a growing worry for the Chinese government – after some mild deflation in 2009 there has been acceleration in the consumer price index. Agricultural prices have been a key driver of inflation with food costs up 12% in the year to March 2011.
For many commentators high inflation in China is a symptom of an over-heating economy with an unsustainable credit and property boom. Another factor behind high inflation is that Wages are rising fast in China – many economists believe that China has hit a point in its development at which demand for labour starts to grow faster than supply, creating labour shortages and pushing up salaries. This is known as a Lewis Turning Point.
read more...»Unit 2 Macro: Focus on China - Carbon Emissions and Growth
Rapid economic growth in China has led to a sharp rise in C02 emissions per head of population and also electric power consumption per capita. Per capita emissions remain well below those of rich advanced nations but China is now committed to improving the sustainability of her economic growth and also in making big advances in researching, testing, developing and investing in clean energy technologies as a source of future exports. According to the 12th Five-year Plan (covering the years 2011-2015) China aims to reduce energy consumption per unit of GDP by 16 percent in the five years to 2015. Carbon dioxide emission will drop by 17 percent if the plans are met.
read more...»Unit 2 Macro: Focus on China - Per Capita Incomes
Per capita incomes in China are rising though still low by advanced-nation levels. China ranks at 119 in terms of average incomes, according to World Bank data (per capita incomes, PPP adjusted). But China is now the biggest car market in the world and there has been a huge rise in the sales of luxury goods to China (these products have a strong income elasticity of demand).
China wants to achieve a re-balancing of her growth – towards domestic consumption and away from exports. Another key aim of the plans for the next 5 years is a surge in market-driven entrepreneurial activity. Plus a continued shift towards higher-value, high-knowledge manufactured products.
read more...»Unit 2 Macro: Focus on China - Changing Economic Structure
China has experienced fast growth in the last twenty years, in the last decade; the increase in Chinese GDP has been seven times the rise in the GDP of Japan. China has a new growth target of 8% pa for the next five years – a downgrading of growth but still way in excess of normal trend growth for any of the advanced economies such as the UK, Germany and the United States. In 2000, China’s accounted for 7.1% of the world’s total GDP (in PPP terms). By 2015 China will have a 19% share of global GDP. This is higher than any of the other BRIC nations
read more...»Unit 4 Macro: Focus on India - Supply Side Issues
The rapid growth of the India economy has been helped by her economy enjoying a number of supply-side advantages. That said there remain structural supply-side weaknesses that will limit her continued competitiveness and development. This blog looks at the plusses and the minuses.
read more...»Unit 2 Macro: Can China Stay Competitive
This new five minute video report from the Financial Times is excellent on the competitive pressures facing many manufacturing businesses located in southern China. Wages are rising quickly and some manufacturing businesses have already moved either to lower-cost locations within the Chinese economy or to other countries such as Bangladesh and Indonesia.
But there are alternative approaches and this video emphasises the decision that some manufacturers have made to stay put but instead to move up the value chain and produce higher-end, higher-priced products for advanced western markets. Businesses are reluctant to move factories and sacrifice the human capital that has been accumulated over in some cases over thirty years.
read more...»RES Annual Essay Competition for Students 2012
The 2012 Royal Economic Society Essay Competition for students has been launched. Details below…
read more...»Unit 4 Macro: Focus on India - Economic Growth
This is the first of a short series of blogs focusing on economic growth and development in the Indian economy, Our first blog provides some background data and study videos on India.
read more...»Unit 2 Macro: Population Shift in China
What happened in the UK in 1851, the United States in 1920 and in the World in 2008? These three years mark the estimated year when the size of a given urban population overtook the size of the rural population. And now China has reached this significant landmark.
The Chinese Bureau for National Statistics reported recently that in 2011, the proportion of urban population reached 51.27 percent (1.3% higher than in 2010) with the urban population standing at 690.79 million persons, an increase of 21 million persons in a year. China’s rural population stood at 656.56 million persons and for the first time her urban population was 34.23 million persons more than the rural population.
Click below for some study / teaching resources:
read more...»Unit 2 Macro: Exporting to the Booming Chinese Economy
Before you read this blog please have a look at another blog written by our good friend Mark Johnston from New Zealand. Students of China and the US economy will find it fascinating!
There are good grounds for no longer calling China an emerging economy - it has arrived! The multiple significance of the rapidly-growing Chinese economy is plain for all to see but for Britain, only a small percentage of our exports of goods and services go there and this must change if Britain is to fully engage with and benefit from the rising might of the Chinese consumer. This article from the Daily Mirror provides a non-technical but clear explanation of the growing purchasing power of newly wealth Chinese, thousands of whom are flocking to western shopping malls to buy premium brands. Chinese foreign exchange reserves are also being used to buy up real assets - last week we heard that a Chinese sovereign wealth fund is set to buy nearly 9% of Thames Water.
read more...»Unit 4 Macro: Russia Joins the WTO
I am using Russia’s entry to the World Trade Organisation in my teaching on international trade and development this term. It appear to be a significant moment for the global economy. Russia is the last member of the Group of 20 major economies to join, after China gained membership in 2001. Progress towards membership has been delayed by numerous geo-political issues not least the disputes with neighbouring Georgia.
Joining the WTO involves making a commitment to the rules of the international trade system - for Russia as with other new members, this will mean reduced import tariffs, the staged elimination of industrial domestic and export subsidies, and better greater access to foreign companies. Russia will also have to improve adherence to international accounting standards.
* Russia’s average bound tariff will be 7.3 percent for manufactured products (compared with 9.5 percent currently)
* Farm tariffs will be 10.8 percent (compared with 13.2 percent currently)
* Russia commits to zero export subsidies on agricultural products - to end by 2017
* Russia will privatise 100 pct of United Grain Company by 2012
* Russia will introduce duty-free and quota-free provisions for the least developed countries
* Russia will eliminate preferential tariffs for carmakers making large investments in Russian-based production by July 1, 2018
* Russia plans to introduce International Accounting Standards
How would you use a supply and demand diagram to show the impact of a fall in an import tariff?
Russian exports as a share of her GDP has actually been on a declining trend in recent years. Will movements towards trade and foreign investment liberalisation reverse this through trade creation and FDI effects? How can a stronger commitment to becoming an open economy supprot higher living standards over time? What are the risks for Russia of WTO accession?
read more...»Unit 2 Macro: Living below the Breadline
This article on the appalling depth of workless households in Liverpool is a reminder of the multiple aspects of relative poverty and economic/social exclusion.
The causes of unemployment are complex - many are structural - but it is hard to draw much if any optimism from reading this article. By some estimates over one third of households in Liverpool have no one in work and second and third generation unemployment is not uncommon. This is a must article for students to read if they want a better awareness of the human cost of non-employment. Read: Below the breadline on Liverpool’s workless estates
read more...»Inflation - what’s up, what’s down and what’s going to happen next
Just as the Monetary Policy Committee have been saying for a while, inflation is starting to fall back towards their target. The fall to 4.2% in December is rather sharper than expected, and is the biggest monthly fall since April 2009. With further falls almost certain in the next few months as the VAT rise and energy price hikes roll out of the 12-month figures, analysts have commented today that this will leave the opportunity for the MPC to inject further rounds of QE into the economy with less fear of triggering too much demand-pull inflation.
read more...»Unit 2 Macro: Videos on Productivity
Here is a selection of short video clips that might be useful when teaching the economics of productivity as part of the AS macro course. I often start with the “Fast Hands” video clip (one minute only) because it raises all kinds of issues about division of labour and the quality of life of people who do these tasks. And the short 25 second clip on the world’s fastest hand is guaranteed to make a mark! If you have some other videos on productivity to share please leave a link in our comment slot at the bottom of the blog.
The Guardian business web site has this excellent photo stream on life inside the Nissan car factory. Follow them on Twitter
read more...»AS and A2 Economics Revision Workshops in Spring 2012 (update)
The dates for our popular Unit 2 & Unit 4 Economics revision workshops in Spring 2012 are now confirmed:
Provisional bookings for these revision workshops can now be made using the following form:
The dates and locations are shown below:
read more...»Unit 2 Macro: Look Upwards to Find the next Downturn
Correlation does not necessarily imply causation but analysts at Barclays Capital are worried that a surge in skyscraper construction in China and India might be a forward indicator of another burst of financial and economic distress. This report in the Independent covers their findings:
“Clusters of building activity usually coincide with periods of easy credit, excessive optimism and rising land prices, which often occur before market corrections.”
* India is scheduled to complete 14 new skyscrapers taller than 240 meters (787 feet) over the next five years from the current two
* China will increase the number of skyscrapers to 141, from the current 75, by 2017
* London’s Shard is expected to be completed in 2012 – at 1,017ft, it will be the tallest building in Western Europe
News video from the BBC: Skyscrapers ‘linked with impending financial crashes’
Guardian news video: Huaxi: the village that towers above China
Unit 4 Macro: Piracy and Econ Development in Somalia
A new year hat tip to Richard Coulthard from Handsworth Grammar School in Birmingham for spotting this BBC news article on the economic impact of piracy in Somalia. Richard comments that this is just what economic theory would predict after large increases in the money supply but from a quirky angle. Read: Somali piracy ‘boosts Puntland economy’ To access the Chatham House report from this which this news report is drawn, please click here
Beyond the Bike - The Importance of Remittances
Joseph is 29 years old and makes a living selling vehicle parts in the dusty trucker town of Igawu in Southern Tanzania. When he approached me during my breakfast and flashed 2 fresh $100 bills, I was naturally interested to know where they came from. I offered him a ride north to find out…
read more...»Newsnight on rebalancing the UK economy
Last night’s edition of Newsnight should be required viewing for all AS and A level economists - and it is a huge shame that it is only available on i-player for another 7 days. Introduced on the shock news that even Tesco is vulnerable to the downturn, it included reports from Andrew Verity looking at whether the British economy will ever wean itself off shopping and the City, and an excellent (and all-female!) discussion including Deborah Meaden and the FT’s Gillian Tett. Try challenging your students to watch and listen to this while noting down every aspect of the syllabus which is mentioned or referred to - that will keep them busy!
There was also a debate between Employment Minister Chris Grayling and disability campaigner Sue Marsh about the government’s welfare reforms, defeated in the House of Lords the night before, and finally Tokyo correspondent Roland Buerk looking at Japanese economic stagnation of the late 1980s and 90s, to consider whether it was a “lost decade” and what could be learnt from it.
Unit 4 Macro: Competitive Advantage in Trade (Some Videos)
Here is a selection of short video clips that I use when teaching competitive advantage in markets and when introducing the factors that determine the competitiveness of UK producers in global markets. The focus here is on the UK economy but I will add some more videos to the blog as I work my way through this teaching topic.
read more...»
