http://www.tutor2u.net/blog/index.php/economics/ en tutor2u.net Copyright 2012 2012-02-12T07:41:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-explained-by-evan http://www.tutor2u.net/blog/index.php/economics/comments/economics-explained-by-evan#When:07:41:03Z Here is a great little article on the Today programme’s website by Evan Davis, looking at the relative merits of Plan A - Austerity - vs Plan B - government spending. He takes the arguments of Jonathan Portes, director of the National Institute of Economic and Social Research, who believes that what’s required at the moment is a short term, temporary fiscal stimulus to boost output and jobs and of Roger Bootle, managing director of Capital Economics, who thinks it would be dangerous for the government to divert from its Plan A of spending cuts. Economic Growth, Government Intervention, International Trade, Macroeconomic Policies, UK Economy, Recession Watch, 2012-02-12T07:41:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-economics-of-fiscal-deficit-reduction http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-economics-of-fiscal-deficit-reduction#When:14:54:41Z 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. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Cycles and Shocks, Aggregate Demand, Macroeconomic Policies, Fiscal Policy, Keynesian Economics, UK Economy, Recession Watch, 2012-01-12T14:54:41+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-uk-bond-yields-reach-record-lows http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-uk-bond-yields-reach-record-lows#When:13:55:18Z 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%. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Macroeconomic Policies, Fiscal Policy, UK Economy, Recession Watch, 2012-01-11T13:55:18+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-quantitative-easing-in-the-uk http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-quantitative-easing-in-the-uk#When:20:06:05Z On 11th March 2009 the Bank of England started a policy of quantitative easing. QE is also called an ‘asset purchase scheme’. It was extended to a total of £275 billion in October 2011 and is likely to be expanded further during 2012. Other central banks have introduced quantitative easing in recent year through huge purchases of government bonds. Indeed the economist Gavyn Davies, writing recently in the Financial Times has calculated that “around one half of the bonds issued to fund the budget deficits of the US, UK and eurozone since 2008 have been acquired by the Fed, BoE and ECB.” This is a remarkable change in the conduct of monetary policy in advanced nations. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Macroeconomic Policies, Monetary Policy, UK Economy, Recession Watch, 2012-01-08T20:06:05+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/surveys-statements-and-predictions-for-2012 http://www.tutor2u.net/blog/index.php/economics/comments/surveys-statements-and-predictions-for-2012#When:16:22:45Z As one of many turn-of-the-year round-ups, the BBC has polled 34 ‘leading economists’ in the UK and EU to find out what they expect for the EU in 2012. Unfortunately this report of the results doesn’t give details, but says that25 of the 27 respondents expect recession to return to Europe next year, with many finding it fairly likely that the eurozone will break up, and 20% expecting that at least one member will leave during next year. A2 Macro, AS Macro, Economic Growth, European Economy, International Trade, Macroeconomic Policies, UK Economy, Recession Watch, 2011-12-30T16:22:45+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/2012-carnage-on-the-high-street http://www.tutor2u.net/blog/index.php/economics/comments/2012-carnage-on-the-high-street#When:16:26:24Z There are many retail industry experts forecasting that the early months of 2012 might be tough for some struggling retailers. We will keep this blog post updated on a regular basis as news of some high profile retail failures comes through. And we will link to media coverage of some of the attempts to restructure retailers under the threat of closure. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Business Economics, Management Issues, UK Economy, Regional Economics, Recession Watch, 2011-12-28T16:26:24+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-the-uk-housing-market-in-2011 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-the-uk-housing-market-in-2011#When:14:44:39Z This blog provides a chart-based overview of developments in the UK housing market in 2011. The housing industry has a big effect on macroeconomic variables such as output, employment and investment. Has there been a marked recovery in property prices, new housing starts and mortgage lending? AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Housing Economics, Market Equilibrium and Price, Price Mechanism in Action, Teaching of Economics, UK Economy, Regional Economics, London Economy, Recession Watch, 2011-12-26T14:44:39+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-christmas-panto-cinderella-2011 http://www.tutor2u.net/blog/index.php/economics/comments/economics-christmas-panto-cinderella-2011#When:11:47:18Z I have set my AS and A2 Economics classes a Christmas task, to write a panto script! The Story so far is in the attached word document - it tells the story of Cinderella (aka the UK economy) and the hard times she is facing, with a Wicked Stepmother and two Ugly Sisters to struggle against. But Cinders has some friends, and just as she is in despair, her Fairy Godmother, Buttons and Prince Charming (Supply-side and Demand-side fiscal policy and Quantitative Easing), turn up to rescue her. The task for the students is to write the script for the rest of the story, as each of her friends describe how they can help, and as she decides which of them can help her to live happily ever after. My A2 classes spent the last two lessons of term writing and acting out their scripts, with some truly memorable results! My AS classes have been set this as a Christmas task, and I look forward to some great performances to come in January - and I don’t see why this couldn’t be used as an early January lesson. If I was setting the task now, I would probably insist that they should include at least 3 direct references to the data in Geoff’s great Prospects for the UK Economy in 2012 powerpoint Cinderella_-_chrismas_lessons_panto_2011-1.doc A2 Macro, AS Macro, Teaching of Economics, Lesson Worksheets, UK Economy, Recession Watch, Quirky Trivia, 2011-12-22T11:47:18+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/changing-consumer-behaviour-falling-incomes http://www.tutor2u.net/blog/index.php/economics/comments/changing-consumer-behaviour-falling-incomes#When:13:15:29Z What links rising VAT and energy prices, higher unemployment, loss of bonuses, a reduction in overtime and more part-time working? AS and A2 Specifications, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Standard of Living, UK Economy, Recession Watch, 2011-12-19T13:15:29+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/where-is-the-uk-economy-national-output http://www.tutor2u.net/blog/index.php/economics/comments/where-is-the-uk-economy-national-output#When:05:18:41Z The first of an occasional series - putting economic data into context. First we focus on the level of real national output in the UK in the aftermath of the recession and with recovery appearently grinding to a halt. UK GDP remains well below the peak of national output at the end of the last cycle in the early months of 2008. During the recession, national output fell by a cumulative 7 per cent. Since then there has been a slow and uncertain recovery and the Bank of England has recently slashed their growth forecasts for the remainder of 2011 and for 2012. Growth of less than 1 per cent will cause unemployment to rise and will damage business and consumer confidence (animal spirits) and further undermine planned capital investment spending. There is a real danger than UK trend economic growth (the estimated annual growth of potential GDP) will continue to edge lower affecting living standards and any chance of the government meeting its medium term deficit reduction targets. Bank of England: Bank of England finds risk of crisis biggest since 2008 AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Macroeconomic Policies, UK Economy, Recession Watch, 2011-11-23T05:18:41+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-the-state-of-british-business http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-the-state-of-british-business#When:12:20:49Z How well is British business coping in the aftermath of recession and during a sluggish recovery? Are there signs of improvement or are there warning signs that the UK business sector is fragile and vulnerable as we head into 2012? Four AS macro students - James Richardson, Ludo Higgin, Joe Landman and Nick Russell collaborated on this excellent piece and searched for some revealing clues about the resilience of British businesses at this crucial stage of the economic cycle. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Business Economics, Macroeconomic Policies, Manufacturing Industry, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2011-11-13T12:20:49+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-can-exports-drive-a-recovery http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-can-exports-drive-a-recovery#When:14:12:47Z UK overseas trade is in the news today with the release of a batch of figures showing a record level of UK exports - see BBC news - UK trade deficit cut by higher exports AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Balance of Payments, Business Economics, Cycles and Shocks, Aggregate Demand, Global Economy, Macroeconomic Policies, Trade Policies, UK Economy, Recession Watch, 2011-10-13T14:12:47+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/uk-unemployment-in-october-2011 http://www.tutor2u.net/blog/index.php/economics/comments/uk-unemployment-in-october-2011#When:12:03:22Z There were some desperately disappointing unemployment and employment numbers published for the UK economy today. Even taking due note of the need not to focus too much on one set of data the UK labour market looks to be weakening as fast as the autumn leaves are falling. The human and social cost of the high jobless figures is enormous and the macroeconomic effect of fewer people in work and paying taxes will dent further hopes of a solid recovery. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR AS Economics Unit F582, Global Economy, Credit Crunch, Labour Market, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2011-10-12T12:03:22+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-unit-labour-costs-and-inflation http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-unit-labour-costs-and-inflation#When:11:53:25Z Over many years the rate of change of unit labour costs (ULCs) has been a decent reliable indicator of inflationary pressures in the UK economy. Times when wage costs adjusted for productivity have grown quickly have often coincided with a rise in the annual rate of inflation - little wonder when payroll costs are a sizeable chunk of operating expenses for many businesses. But in the last couple of years we have seen a growing disconnect between unit labour cost inflation and the published figures for CPI. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Labour Market, Macroeconomic Policies, Standard of Living, UK Economy, Recession Watch, Unemployment, 2011-10-12T11:53:25+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-uk-suffers-a-weak-recovery http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-uk-suffers-a-weak-recovery#When:08:34:36Z AS macro students will be studying the economic cycle and following the struggles of many countries to sustain a recovery in demand, output and jobs after the 2008-09 recession. The well respected independent forecasting body, the National Institute (NIESR) has produced new data suggesting that the UK recovery is on course to be “the weakest of any since the end of the First World War”, with gross domestic product still 4pc below its pre-recession peak. The risks of a second recession (a double dip) look to be rising week by week especially when one looks at the consumer and business confidence data. Here is a link to the NIESR report and also to BBC news coverage of their findings. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Cycles and Shocks, Aggregate Demand, Economic Growth, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, 2011-10-12T08:34:36+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/changing-consumer-behaviour-taxing-saturated-fat http://www.tutor2u.net/blog/index.php/economics/comments/changing-consumer-behaviour-taxing-saturated-fat#When:21:22:11Z The government in Denmark, has introduced additional taxes on foods which contain more than 2.5% saturated fat. It will add 25p on packets of butter, 8p on crisps. This BBC news clip introduces this new fiscal measure. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 2, EdExcel Economics Unit 1, EdExcel Economics Unit 2, OCR AS Economics Unit F581, OCR AS Economics Unit F582, AS Macro, AS Micro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Market Failure, Standard of Living, UK Economy, Recession Watch, 2011-10-02T21:22:11+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-imf-flags-up-risks-of-double-dip http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-imf-flags-up-risks-of-double-dip#When:19:16:00Z Here are some of the salient points from the gloomy World Economic Forecast from the IMF which argues that the global economy has entered a dangerous phase. The IMF report highlights many of the vulnerabilities facing both developed and emerging economies. In Britain the media is emphasising a sizeable reduction in the forecast rate of growth for the UK for 2011 and 2012. Real GDP in the UK is likely to expand by just 1.1% in 2011 and 1.6% next year and the IMF economists say that there is a one in five chance of a double dip recession. Weak growth is terrible news for the Chancellor who is hoping for a significant expansion of the private sector to offset fiscal cuts and to meet the targets for fiscal deficit reduction. It is also awful for prospects of a meaningful reduction in unemployment and prospects of tackling the structural issue of very high youth unemployment rates. Incidentally that risk of a double-dip is thought to be much higher in the United States where the probability of a second recession following a partial recovery is put at 40%. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Emerging Economies, Cycles and Shocks, Global Economy, IMF, Credit Crunch, Teaching of Economics, UK Economy, Recession Watch, 2011-09-20T19:16:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/uk-macro-risks-of-a-double-dip-recession http://www.tutor2u.net/blog/index.php/economics/comments/uk-macro-risks-of-a-double-dip-recession#When:10:04:00Z How close is the British economy to experiencing a double-dip recession? Many of the key macro-economic indicators are heading in a southerly direction - new orders, business and consumer confidence, real incomes, housing starts and the worst of the fiscal squeeze on the economy is yet to hit.  For those teaching the economic cycle and also for students wanting to get a picture of where the economy is at this crucial time, I have put together a slide presentation on the risks of a double-dip recession together with a link for the PowerPoint download. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Teaching of Economics, UK Economy, Recession Watch, 2011-09-12T10:04:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-evan-davis-on-re-balancing-the-economy http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-evan-davis-on-re-balancing-the-economy#When:16:53:00Z Here is a terrific resource for teachers and students looking for an assessment of where the UK economy might be heading at a crucial stage of the economic cycle. BBC radio 4’s Today programme has three reports on the challenges facing the UK economy from Evan Davis. Here is the link to the main web page article from which the three short radio reports can be accessed. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Cycles and Shocks, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, 2011-08-25T16:53:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/keynes-vs-hayek-how-to-solve-an-economic-crisis http://www.tutor2u.net/blog/index.php/economics/comments/keynes-vs-hayek-how-to-solve-an-economic-crisis#When:07:42:00Z As major economies are buffeted by crisis again, the excellent Keynes vs Hayek debate held at the LSE last month is thrown into ever sharper context. You can hear the 30-minute radio programme made from the debate here on BBC i-player, or download it as a podcast. There is also an article here introducing the opposing arguments, which students could use in September to analyse the changes to the global economic situation - no doubt there are still many twists and turns to come in the next month for them to work with. Cycles and Shocks, European Economy, Financial Markets, Government Intervention, Macroeconomic Policies, Monetarism, Teaching of Economics, UK Economy, Recession Watch, 2011-08-08T07:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-reducing-unemployment-after-a-recession http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-reducing-unemployment-after-a-recession#When:12:30:00Z How quickly do people find new work after they have been made redundant and experienced a period of unemployment? According to new research published in the May 2011 edition of the Economic Journal, only around one person in every ten unemployed in Britain finds fresh work within a month and nearly half of the extra unemployed created in the wake of an economic shock such as the fallout from the global financial crisis are still without a new job after six months. If government economic policies and the labour market generally are failing to get people back into paid jobs the impact of a recession on unemployment rates can last for a substantial time period bringing with it increased economic and social costs. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Labour Market, Macroeconomic Policies, Market Failure, Factor Immobility, UK Economy, Recession Watch, Unemployment, 2011-07-11T12:30:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-rising-cost-of-the-minimum-standard-of-living http://www.tutor2u.net/blog/index.php/economics/comments/the-rising-cost-of-the-minimum-standard-of-living#When:05:34:00Z The Joseph Rowntree Foundation has just published its annual report into Minimum Income Standard for the UK, reported here by the BBC, and showing how much money is needed for an acceptable standard of living. They look at the effects of tax and benefits on the budgets for different family types to show the wage you need to earn in order to have enough to afford what ordinary members of the public (their definition) agree is needed to survive and take part in today’s society. AS and A2 Specifications, AQA Economics Unit 4, A2 Macro, Macroeconomic Policies, Poverty and Inequality, Standard of Living, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2011-07-05T05:34:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/rise-in-investment-could-kick-start-recovery http://www.tutor2u.net/blog/index.php/economics/comments/rise-in-investment-could-kick-start-recovery#When:20:42:00Z UK businesses are sitting on a pile of cash and need to loosen the purse strings and invest more according to new research from Ernst and Young. Their latest macroeconomic forecast for the UK can be found here. There has been a shift in the share of total factor incomes flowing to workers and a corresponding rise in the share of profits in GDP (by factor income). Ernst and Young find that wages and salaries in the UK fell from 46.5% of GDP to 45.3% last year, while the share of non-financial company profits increased from 15.9% to 16.2%. The non-financial company financial surplus increased from £56 billion to £71 billion, almost 5% of GDP helped by a fall in interest payments on debt and a sharp fall in dividend payments. For economists at Ernst and Young, the cash mountain provides a big opportunity for the UK economy. They are urging companies either to step up capital spending commitments including creating extra capacity to export products. Or return surplus cash to shareholders through bigger dividends. The Ernst and Young forecast shows business investment in the UK increasing by 12.3 % this year and another 14.1% in 2012. With housing investment slowly recovering, this easily outweighs the effect of lower public sector investment, pushing total investment up by 5.7% this year and 8.1% in 2012. Higher investment provides a boost to aggregate demand and also the economy’s productive capacity. And a rise in exports will help to re-balance the economy. For cash to be committed to investment projects requires sufficient business confidence and this is where the Keynesian idea of animal spirits becomes so important to where the UK economy is heading over the next year or two. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Macroeconomic Policies, UK Economy, Recession Watch, 2011-04-18T20:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/uk-economy-at-a-glance http://www.tutor2u.net/blog/index.php/economics/comments/uk-economy-at-a-glance#When:08:31:00Z Here is an updated word document covering many of the key UK macroeconomic indicators - focusing on aggregate demand, growth, inflation, the labour market, fiscal and monetary policy, trade and exchange rates. It provides a summary of the data from 2009-2011(forecast) and provides brief comments on each - designed as a revision aid for students taking their AS and A2 Economics papers this summer. The document can be downloaded using these links: UKEconomy2011Summary.docx UKEconomy2011Summary.pdf AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, 2011-04-17T08:31:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-macro-back-to-roubini-a-year-on http://www.tutor2u.net/blog/index.php/economics/comments/a2-macro-back-to-roubini-a-year-on#When:18:51:00Z Almost a year ago I headed to the LSE to hear Nouriel Roubini launch a new book “Crisis Economics”. The notes that I took at the time are reprised below and reading through them again, I am struck by just how accurate the Roubini assessment was of where the next phase of the financial and economic crisis would move. Many of the remarks are relavant to students preparing for the OCR F585 paper for June 2011 and also for other A2 macro students wanting some evaluative comments on the international economic crisis. I have repeated my comments from the May 2010 blog and they appear below. There has been some minor editing and I have supplemented the blog with some charts drawn from the team at Timetric. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, Cycles and Shocks, European Economy, The Euro, OECD Economies, Greece Economy, UK Economy, Recession Watch, 2011-04-11T18:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-virtuous-circle-of-recovery-paul-krugman http://www.tutor2u.net/blog/index.php/economics/comments/a-virtuous-circle-of-recovery-paul-krugman#When:09:44:00Z A hat tip to Larry Spence for flagging up this super piece from Paul Krugamn in the New York Times. His focus is on the dynamics of an economic recovery and the risks of fiscal austerity tipping the US back into recession. “As families have repaired their finances, they have increased their spending; as consumer demand has started to revive, businesses have become more willing to invest; and all this has led to an expanding economy, which further improves families’ financial situation…....... The clear and present danger to recovery, however, comes from politics — specifically, the demand from House Republicans that the government immediately slash spending on infant nutrition, disease control, clean water and more.” More here on How to Kill a Recovery AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Economic Growth, Macroeconomic Policies, Fiscal Policy, OECD Economies, US Economy, UK Economy, Recession Watch, 2011-03-06T09:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/david-smith-on-shifting-sands-in-the-global-economy http://www.tutor2u.net/blog/index.php/economics/comments/david-smith-on-shifting-sands-in-the-global-economy#When:23:50:00Z David Smith from the Sunday Times was on fine form in his talk to the Global Economy Student Enrichment event at Fulham yesterday. I have some brief notes below on some of his key themes and the pdf version of his presentation can be downloaded from the link at the bottom of the blog AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Emerging Economies, Cycles and Shocks, European Economy, Global Economy, Credit Crunch, Macroeconomic Policies, OECD Economies, Teaching of Economics, UK Economy, Recession Watch, 2011-02-08T23:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/5-fresh-links-youth-unemployment-in-the-uk http://www.tutor2u.net/blog/index.php/economics/comments/5-fresh-links-youth-unemployment-in-the-uk#When:23:26:01Z Many students and teachers will be looking at the issue of rising unemployment in the UK at the moment - focusing on the causes of effects of a high number out of work and also the effectiveness of different strategies for getting people back in a job. Youth unemployment is an especially important structural problem in the labour market and new figures find that nearly one young person in five is unemployed.  Indeed 260,000 under-16s live in homes where nobody has ever worked. Here are five links to supporting resources including news articles, background comment pieces and videos. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, A2 Macro, AS Macro, Labour Market, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2011-01-24T23:26:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-will-the-rise-in-vat-harm-the-uks-economic-performance http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-will-the-rise-in-vat-harm-the-uks-economic-performance#When:14:48:00Z 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? AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, Economics Q&A, Q&A - Macro, A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Government Intervention, Indirect Taxes, Macroeconomic Policies, Fiscal Policy, Teaching of Economics, UK Economy, Recession Watch, 2011-01-17T14:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-why-might-europes-weaker-economies-struggle-to-grow-in-the-nex http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-why-might-europes-weaker-economies-struggle-to-grow-in-the-nex#When:21:46:00Z A starting point to this question is to discuss what “weaker EU countries” might mean. We can use some of the conventional indicators of macro performance to help us namely: 1. Slow or negative economic growth 2. Rising unemployment and falling employment rates 3. Deteriorating public sector finances and higher government debt 4. Relatively high inflation or perhaps an economy experiencing a period of deflation 5. A high deficit in trade in goods and services Other indicators might be used to identify weaknesses in performance - for example: 1. Relatively low labour productivity 2. A falling share of global trade 3. Rising yields on long term government bond issues 4. Weaknesses in non-price competitiveness AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, European Economy, The Euro, Global Economy, OECD Economies, Greece Economy, Ireland Economy, Spain Economy, Teaching of Economics, Recession Watch, 2011-01-02T21:46:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/euro-in-focus-fiscal-austerity-measures http://www.tutor2u.net/blog/index.php/economics/comments/euro-in-focus-fiscal-austerity-measures#When:09:50:00Z 2009 and 2010 have been hugely difficult and painful years for many of the countries inside the currency union. A dangerous combination of deep recession, rising unemployment, a severe worsening of government finances, high public sector debts and the expectation that a period of fiscal austerity will hit living standards badly have all contributed to a sense of malaise for those countries that have entered monetary union. AS and A2 Specifications, AQA Economics Unit 4, A2 Macro, European Economy, The Euro, Macroeconomic Policies, Fiscal Policy, UK Economy, Recession Watch, 2010-12-24T09:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/uk-economy-in-focus http://www.tutor2u.net/blog/index.php/economics/comments/uk-economy-in-focus#When:13:02:00Z Our regularly updated main macroeconomic presentation on developments in and prospects for the UK economy is now available. All of the data charts have been brought up to speed and the resource is available as a streamed presentation and also as a pdf handout Follow the links below: UK economy streamed presentation Available here handout (3 slides + space for notes) Available here Follow the links below for a selection of recent revision presentations on macroeconomics AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, 2010-12-22T13:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/using-google-docs-the-irish-financial-crisis http://www.tutor2u.net/blog/index.php/economics/comments/using-google-docs-the-irish-financial-crisis#When:17:58:00Z My Year 13 students have worked on a collaborative piece this week on the Irish financial and economic crisis. We considered the background to the crisis, why the UK is helping with the bail out and some of the consequences for the future stability of the Euro. The final version of the Google Doc is available to download here. A2_Macro_Irish_Crisis.pdf AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, European Economy, The Euro, Macroeconomic Policies, Keynesian Economics, OECD Economies, Ireland Economy, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-11-29T17:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/krugam-attacks-the-coalitions-fiscal-policies http://www.tutor2u.net/blog/index.php/economics/comments/krugam-attacks-the-coalitions-fiscal-policies#When:22:30:00Z Paul Krugman is currently on a speaking tour and he has used his column in the New York Times to lay into the coalition government’s fiscal plans - confirmed this week with the spending review. Winner of the 2008 Nobel Prize in Economics, Krugman’s strong Keynesian foundations rarely take long to surface and this article is no exception. “The best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997. That is, premature fiscal austerity will lead to a renewed economic slump. As always, those who refuse to learn from the past are doomed to repeat it. So is Britain on the road to a lost decade such as that suffered by Japan? Keep reading as many articles as you can on the stimulus v fiscal consolidation debate for it lies at the heart of so much that is important in macroeconomic policy-making at the moment. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Macroeconomic Policies, Fiscal Policy, Keynesian Economics, UK Economy, Recession Watch, 2010-10-22T22:30:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/will-the-bank-use-qe-as-a-hangover-cure http://www.tutor2u.net/blog/index.php/economics/comments/will-the-bank-use-qe-as-a-hangover-cure#When:10:11:00Z Yesterday Mervyn King coined another acronym to describe the decade ahead - his assessment is that this will be the SOBER decade - “a decade of savings, orderly budgets, and equitable rebalancing”.Some analysts are seeing his speech last night, reported here by the BBC website, as a signal that the Bank of England are contemplating more quantitative easing in the near future. The Governor of the Bank said that at present the amount of money in the economy was still “barely growing at all” - figures released by the Bank this morning show that seasonally adjusted provisional figures for ‘broad money’ in September are as follows: M4 decreased by £5.5 billion (0.3%), compared with an average monthly increase for the previous six months of £0.8 billion. The twelve-month growth rate fell to 0.9% from 1.9% in August. M4 lending decreased by £0.7 billion (0.0%) in September. The twelve-month growth rate fell to 0.0% from 0.7% in August . Last night the Governor said that it was a “key role” for the Bank to provide stimulus when the economy was in need, so the judgement will depend on how great that need is, and which are the greatest risks facing us - inflation, or lack of growth. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, AS Macro, Financial Markets, Macroeconomic Policies, Monetary Policy, UK Economy, Recession Watch, 2010-10-20T10:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economist-public-debt-clock http://www.tutor2u.net/blog/index.php/economics/comments/economist-public-debt-clock#When:20:01:00Z One to have ticking away on your screen in the classroom? The Economist web site has launched a new interactive global debt chart - dont have nightmares Macroeconomic Policies, Fiscal Policy, Teaching of Economics, Recession Watch, 2010-10-06T20:01:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/imf-signs-off-on-uks-fiscal-plans http://www.tutor2u.net/blog/index.php/economics/comments/imf-signs-off-on-uks-fiscal-plans#When:21:37:00Z The IMF signed off on George Osborne’s fiscal deficit plans today. The Fund praised the government’s bold strategy to eliminate the deficit within five years. The deficit reduction plan “greatly reduces the risk of a costly loss of confidence in fiscal sustainability and will help rebalance the economy,” the concluding statement of the mission said. It welcomed the early action on the deficit and the weight given to spending cuts rather than tax increases. More here. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Global Economy, IMF, Credit Crunch, Macroeconomic Policies, Fiscal Policy, UK Economy, Recession Watch, 2010-09-27T21:37:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-macro-economic-growth-charts http://www.tutor2u.net/blog/index.php/economics/comments/a2-macro-economic-growth-charts#When:19:50:00Z We started our teaching this year by looking at issues related to measuring living standards and now we are moving onto aspects of the causes and consequences of economic growth. I like to put growth into some kind of context by drawing on recent UK cyclical data and growth information for a range of other countries. I have attached a brief powerpoint of such charts with this blog which may be of some use for colleagues. One of the interesting trends for many OECD countries is that estimated trend growth (the % change in potentail) GDP has fallen sharply in recent years. Indeed for Spain and Ireland, trend growth estimates have dropped into negative territory. Mo’s recent blog on hysteresis links in part to why this is happening. Download the A2 Macro Growth Charts Economic_Growth_Charts.pptx AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Emerging Economies, Cycles and Shocks, Economic Growth, OECD Economies, Ireland Economy, Japan Economy, Spain Economy, US Economy, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-09-21T19:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/us-recession http://www.tutor2u.net/blog/index.php/economics/comments/us-recession#When:18:48:00Z The U.S. recession will probably be the longest since World War Two and could worsen without heavy government spending, according to a closely-watched survey of economists released on Saturday. Read more here… AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Global Economy, OECD Economies, US Economy, Recession Watch, 2010-09-20T18:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/what-shape-is-a-recession http://www.tutor2u.net/blog/index.php/economics/comments/what-shape-is-a-recession#When:20:48:00Z A hat tip to Michael Owen for spotting this ‘recession related’ article from the BBC news magazine. Recession Watch, 2010-09-17T20:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-shape-of-recession-data http://www.tutor2u.net/blog/index.php/economics/comments/the-shape-of-recession-data#When:20:10:00Z How do you decide how bad a recession really is, and whether it is worse, or less painful, than the last one? In the BBC Magazine Michael Blastland has taken six indicators, and mapped them all on a web to show the relative shape of the last three recessions. In the article about the technique he describes the difficulties of choosing the most appropriate data points in order to get a useful comparison. The indicators he has used are related to figures giving the most extreme points reached in each of the last three recessions: top to bottom percentage fall in GDP; peak repossessions as a proportion of mortgaged properties; peak quarterly unemployment rate; peak annual business liquidations as a proportion of companies on the active register; peak annual public sector borrowing as a proportion of GDP; worst annual change in real disposable income per head. However, he makes the point that any number of different indicators could be used, depending on the particular area of interest that you wanted to compare. It would be possible to ask students to choose the indicators that they found the most relevant and draw their own recession webs, using data from any number of sources, and to justify their choice before they analyse the results of their work. A2 Macro, Cycles and Shocks, UK Economy, Recession Watch, 2010-09-16T20:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/macroeconomic-developments-in-the-uk-economy-september-2010 http://www.tutor2u.net/blog/index.php/economics/comments/macroeconomic-developments-in-the-uk-economy-september-2010#When:21:29:00Z Here is an updated version of the keynote tutor2u teacher presentation on key developments in the UK Economy… AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR AS Economics Unit F582, A2 Macro, AS Macro, Global Economy, Macroeconomic Policies, Fiscal Policy, Monetary Policy, Supply-side policies, Trade Policies, OECD Economies, Teaching of Economics, UK Economy, Recession Watch, 2010-09-04T21:29:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/autumn-leaves-are-falling-for-the-global-economy http://www.tutor2u.net/blog/index.php/economics/comments/autumn-leaves-are-falling-for-the-global-economy#When:07:04:00Z The arrival of the Fall is often a time to take stock of where the global economy is heading and there have been several perceptive and fascinating blogs on this in recent days.   AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Emerging Economies, Indian economy, Global Economy, IMF, Credit Crunch, Macroeconomic Policies, OECD Economies, Teaching of Economics, UK Economy, Recession Watch, 2010-09-02T07:04:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/risks-of-double-dip-rise-over-the-pond http://www.tutor2u.net/blog/index.php/economics/comments/risks-of-double-dip-rise-over-the-pond#When:15:52:00Z There are some very worrying signs for the United States today with the news that new home sales (for completed properties and those under construction) have dropped to to their lowest level for nearly 50 years. Dr Doom, Noruiel Roubini has tweeted that the risk of a double dip recession in advanced economies (comprising the USA, Japan, the Eurozone and the UK) has now risen to 40%. The fall in new home sales is taken as a litmus test of weakening confidence and signs that the fiscal and monetary policy stimulus policies have started to run out of steam. Unemployment claims in the USA are up to 500K per month and a fresh descent into recession in the labouy-intensive US construction industry will give deeper deflationary pressure on the world’s largest economy. Since the start of the global financial crisis, US construction businesses have shed more than two million jobs. In a related feature, Nouriel Roubini takes tea with the Economist and discusses some of the main systemic risks for the global economy. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, OECD Economies, US Economy, Recession Watch, Credit Crunch, 2010-08-25T15:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-stimulus-debate-krugman-versus-ferguson http://www.tutor2u.net/blog/index.php/economics/comments/the-stimulus-debate-krugman-versus-ferguson#When:14:14:00Z If you are looking for an introduction to some of the key themes in the debate about how best macro policy should respond to the global financial crisis and the recession then this set of videos from Global Public Square could be pitch perfect. There are interviews with the Keynesian-leaning Paul Krugman and Niall Ferguson who buils the case for running small fiscal deficits. Links to the videos are below AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, Macroeconomic Policies, Teaching of Economics, Recession Watch, 2010-08-24T14:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/credit-squeeze-businesses-rely-more-on-factoring http://www.tutor2u.net/blog/index.php/economics/comments/credit-squeeze-businesses-rely-more-on-factoring#When:19:02:00Z A new report has found that the cost of borrowing money for small and medium size enterprises continues to rise as the economy struggles to sustain and meaningful recovery. Risk-averse banks have lifted borrowing interest rates and tightened the conditions on which loans are offered - a major bone of contention for businesses under threat of going under or perhaps looking for fresh funding to cover the cost of expansion. Many are turning to factoring as an alternative to traditional loans and overdrafts. Under factoring a business chooses to pass on an existing invoice to a factoring company who pays a percentage of that invoice straightaway. The balance is received when an invoice is settled with the factoring company taking their own % cut and charging an administration / commission fee for handling a businesses’s credit management. It is not cheap - but turning an invoice into cash immediately can be a lifeline. This BBC news report looks at the case of James Winnister who runs a security and fire installation business, and has to use factor invoicing to manage his cashflow. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, A2 Micro, AS Micro, Business Economics, Recession Watch, Credit Crunch, 2010-08-23T19:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/king-on-the-economy http://www.tutor2u.net/blog/index.php/economics/comments/king-on-the-economy#When:23:35:00Z The Guardian offers a good summary of the main issues arising from Mervyn King’s recent Inflation Report. There is a great little animation in the middle of this article to show how each month the Bank’s projected growth figures have always proven to be a little too optimistic and how they have deteriorated over the past couple of years. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Macroeconomic Policies, Monetary Policy, UK Economy, Recession Watch, Unemployment, Credit Crunch, 2010-08-11T23:35:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/choppy-times-ahead http://www.tutor2u.net/blog/index.php/economics/comments/choppy-times-ahead#When:12:17:00Z “Looking ahead, the UK economy is facing a major rebalancing away from private and public consumption and towards net exports. Achieving that rebalancing, while confronting these headwinds, is likely to mean a choppy recovery.”  (Mervyn King on prospects for the UK economy over the next couple of years). Details here of the Bank of England’s latest inflation forecasts.  But as Chris Giles pointed out in an article in the Financial Times earlier on this week: “Despite having hundreds of economists working in the Bank, and the most sophisticated suite of economic models in the UK, the monetary policy committee’s forecasts since 1997 have achieved no better outcome than if the committee had simply predicted the average level for inflation and growth over the 13-year period” Hat tip to Michael Owen for spotting this excellent FT analysis. FT audit casts doubt on Bank’s forecasts AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Macroeconomic Policies, Monetary Policy, Teaching of Economics, UK Economy, Recession Watch, 2010-08-11T12:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/reasons-to-fear-a-jobless-recovery http://www.tutor2u.net/blog/index.php/economics/comments/reasons-to-fear-a-jobless-recovery#When:10:40:00Z Will the UK labour market be able to generate enough new jobs to sustain the recovery? There are plenty of doubts surfacing at the moment and we might be finding ourselves on the cusp or yet another surge in structural unemployment. Here are some reasons why - despite our much vaunted flexible labour market - a jobless recovery is on the cards. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Labour Market, Macroeconomic Policies, UK Economy, Recession Watch, Unemployment, 2010-08-11T10:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/consumer-sentiment-weakens-as-double-dip-looms http://www.tutor2u.net/blog/index.php/economics/comments/consumer-sentiment-weakens-as-double-dip-looms#When:07:44:00Z Swings in consumer confidence have often provided reliable evidence of short term turning points in economic activity. And there are growing fears of a double-dip recession for the UK with a raft of household surveys suggesting a weakening of sentiment about prospects for the economy. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, UK Economy, Recession Watch, Credit Crunch, 2010-08-02T07:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/where-next-for-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/where-next-for-the-uk-economy#When:09:12:00Z The Independent newspaper yesterday carried a pessimistic interview with the Chief Economist of the Bank of England (Spencer Dale) in which he commented on the risk of a “triple whammy” for the British economy - namely a dubious combination of anemic growth, rising inflation and much higher unemployment. The interview is available here. According to the piece “The economy, said Mr Dale, would not return to normal “for an awfully long time”. Tough times ahead for sure but perhaps there are also grounds for optimism not least for manufacturing industries able to export their products to economies that are emerging from the downturn. And the latest (albeit provisional) data for UK GDP shows an economy much stronger than many people expected. The UK economy grew by 1.1% in the three months from April through to June - close to double the growth rate that was expected by the markets. I have updated my keynote presentation on recent macroeconomic developments for the UK economy. This seventy-five slide presentation covers many of the main macro indicators and focuses on some of the risks and opportunities for Britain into the next crucial stage of the cycle. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2010-07-23T09:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/how-can-supply-side-policies-help-in-an-economic-recession http://www.tutor2u.net/blog/index.php/economics/comments/how-can-supply-side-policies-help-in-an-economic-recession#When:06:31:00Z Recessions are often the result of negative demand-side shocks that hit real incomes of consumers and demand and profits for businesses. The consequences show through in higher unemployment, a fall in capital investment and an increasing rate of business failures. Most macroeconomic policies in a recession centre on boosting demand and confidence in a bid to generate a rebound in output, jobs and incomes within the circular flow. What role can supply-side policies play during an economic downturn? AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Macroeconomic Policies, Supply-side policies, UK Economy, Recession Watch, 2010-06-06T06:31:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-revision-macroeconomic-performance http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-revision-macroeconomic-performance#When:20:23:00Z Macroeconomic performance refers to an assessment of how well a country is doing in reaching key objectives of government policy. The main aim of policy is usually an improvement in the real standard of living for their population. The term ‘real’ means that we have taken into account the effects of rising prices so that we get a better picture of how many goods and services we can afford to buy and consume. Macroeconomic policy is not solely concerned with living standards. The bigger picture would take into account some of the following: AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, 2010-06-05T20:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/housing-and-the-british-economy http://www.tutor2u.net/blog/index.php/economics/comments/housing-and-the-british-economy#When:19:51:00Z Here are some charts of recent developments in the UK housing market and some revision notes on the impact of the housing recession on macroeconomic performance AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Housing Economics, Teaching of Economics, UK Economy, Recession Watch, 2010-06-05T19:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-revision-consumer-borrowing http://www.tutor2u.net/blog/index.php/economics/comments/as-macro-revision-consumer-borrowing#When:06:59:00Z Most of us at some time need to borrow money to finance spending. From taking out a mortgage or using a student loan and making frequent use of bank credit cards, borrowing is a normal feature of life and not necessarily something to be worried about. What matters is whether building up debt is sustainable – in other words, can those who rely on debt pay it back? Huge levels of borrowing and an inevitable surge in household debt were features of the long period of growth that came to an end in 2008. Now the British economy is being held back by a historically high level of consumer debt - and you thought that it was the British government stuck in the deepest debt trap? AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, UK Economy, Recession Watch, Credit Crunch, 2010-05-30T06:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-do-we-need-to-know-about-output-gaps http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-do-we-need-to-know-about-output-gaps#When:18:02:00Z Q&A: For AS macroeconomics, what do we need to know about output gaps? AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, Economics Q&A, Q&A - Macro, AS Macro, Cycles and Shocks, Aggregate Demand, UK Economy, Recession Watch, Credit Crunch, 2010-05-29T18:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/warnings-of-hysteresis-for-the-eu-economy http://www.tutor2u.net/blog/index.php/economics/comments/warnings-of-hysteresis-for-the-eu-economy#When:12:05:00Z This is an updated blog post on the topic of hysteresis in the EU economy. The recession and financial crisis may lead to a permanent loss in potential economic output and a slower trend rate of growth in the future according to a study by the European Commission. The fall in potential GDP will be an example of hysteresis effects across the European economy and the cyclical downturn in output and jobs creates long term damage. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Supply, Economic Growth, European Economy, Global Economy, Credit Crunch, OECD Economies, Spain Economy, US Economy, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2010-05-29T12:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/sterling-and-exports-the-importance-of-time-lags http://www.tutor2u.net/blog/index.php/economics/comments/sterling-and-exports-the-importance-of-time-lags#When:07:05:00Z Roger Bootle has an excellent article on the lagged effects of a competitive exchange rate in today’s Telegraph. One of his arguments is that the default behaviour of many UK exporters is to take higher profit margins from their overseas sales rather than cutting their prices to boost export volumes. Crucially the impact of a lower currency takes time to show through in the international trade data and this is partly because switching production to countries where the exchange rate is favourable cannot happen overnight .... read this paragraph: “Where export prices are not cut, this does not necessarily mean that the weaker currency will do no good. It is rather that the benefit will take longer to come through. In response to higher profit margins, firms will have more incentive to sell abroad. In the economic textbooks, selling abroad, or switching from European to Asia markets, is simply a matter of pressing a button. In reality it isn’t like this; sales networks have to be established, modifications to the products or services made; foreign relationships built up. These things do not happen overnight.” The article reminds us that a more competitive exchange rate helps to re-balance the economy at a time of domestic weakness. But that the benefits of a weaker pound have been diluted by (i) Supply-side weakness in UK industries (e.g. a lack of some aspects of non-price competitiveness) (ii) Low demand in key export markets - not least the European Union (iii) Longer than expected time lags between a fall in the currency and a pick up in export sales Many exporters have also been held back by problems in accessing trade credit - few importers pay in advance for goods and services sold overseas! More of the Roger Bootle article can be found here: The competitive pound is one of the few things we have got going for us A2 Macro, AS Macro, Balance of Payments, Cycles and Shocks, Exchange Rates, Macroeconomic Policies, UK Economy, Recession Watch, 2010-05-29T07:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/greeks-shadow-economy-and-institutions http://www.tutor2u.net/blog/index.php/economics/comments/greeks-shadow-economy-and-institutions#When:09:50:01Z Economic institutions matter! From the credibility of central banks to the roles played by legal systems in upholding property rights and the need for a functioning system of government in collecting tax revenues and making sure that each dollar or euro or pound of state spending is money fairly well spent. I enjoyed reading Tyler Cowen’s piece in the New York Times today - among many others he senses that an eventual default and departure from the Euro is probably the best approach that greek can take. The budget crisis facing Greece boils down to excessively high levels of government spending and a failure to collect sufficient tax income. This comes as no surprise when we discover the size of Greece’s shadow economy. “Greece has a malfunctioning fiscal system in which the shadow economy is estimated to be roughly 20 to 30 percent of the reported economy and tax evasion may run at $30 billion a year. Simply collecting taxes that are legally due would help bring Greece’s books into balance, yet even this simple remedy does not appear imminent.” More here AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, AS Macro, European Economy, The Euro, OECD Economies, Greece Economy, Recession Watch, Credit Crunch, 2010-05-25T09:50:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/britain-at-risk-of-japan-style-deflation http://www.tutor2u.net/blog/index.php/economics/comments/britain-at-risk-of-japan-style-deflation#When:08:41:00Z So warns MPC member Adam Posen - whose remarks at a speech at the LSE are reported in the Telegraph. It is worth flagging up three of the specific difficulties facing the UK according to the Posen view 1/ The heavy reliance on foreign investors as a source of funding for the UK fiscal deficit 2/ Britain’s small manufacturing sector - currently rebounding quite well - but not of a sufficient size to make a really big difference to prospects of a recovery 3/ Continued weakness and fragility in the UK banking system - where deeply risk averse behaviour and continued de-leveraging is “undermining companies’ abilities to raise funds” prompting many businesses to hoard cash rather than invest. More here from the Independent The Realities and Relevance of Japan’s Great Recession - slides and transcripts are available here AS and A2 Specifications, AQA Economics Unit 4, A2 Macro, AS Macro, Inflation and Deflation, UK Economy, Recession Watch, 2010-05-25T08:41:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-data-description-revision-on-fiscal-deficits http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-data-description-revision-on-fiscal-deficits#When:18:26:00Z Here is another example of some macro-economic data that you might be asked to interpret in an A2 AQA data response exam paper “Using the extract, identify two significant features of the changes in the fiscal balance for the USA and the UK over the period shown by the data” (5 marks) AS and A2 Specifications, AQA Economics Unit 4, A2 Macro, Macroeconomic Policies, Fiscal Policy, UK Economy, Recession Watch, 2010-05-23T18:26:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/europe-the-weak-link-in-the-world-economy http://www.tutor2u.net/blog/index.php/economics/comments/europe-the-weak-link-in-the-world-economy#When:13:09:00Z A link to an excellent and thought-provoking article by Paul Mason from BBC Newsnight on the implications of the Greek/Euro Zone crisis. He argues that the ripping up of the Euro Zone fiscal rule book and the eventual bail out of the Greek economy shifts the risks to taxpayers in Northern Europe. “In the 27 member states of the EU, it is France, Germany, Italy and the UK which bear the risk of southern European default. That is to say, the taxpayers of northern Europe. And, as members of the IMF, the industrialised countries of Europe are additionally exposed to the Fund’s €250bn loan.” Stage Three of the financial crisis - hallmarked by an age of austerity poses severe social and political risks across the continent. In a related feature Professor Joe Stiglitz is interviewed here by BBC World and argues that imposing fiscal austerity by european governments risks plunging Europe into a second recession.   A2 Macro, European Economy, The Euro, OECD Economies, Greece Economy, Teaching of Economics, UK Economy, Recession Watch, 2010-05-23T13:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-end-of-newcastle-brown-ale-brewing-on-tyneside http://www.tutor2u.net/blog/index.php/economics/comments/the-end-of-newcastle-brown-ale-brewing-on-tyneside#When:15:50:00Z An iconic drink whose sales in the USA out-strip demand in local pubs and clubs - the Federation Brewery in Gateshead has brewed its last barrel of Newcastle Brown Ale as production transfers to Tadcaster in Yorkshire! It could be a useful micro-example of structural unemployment in the regional labour market. The good news is that Newcastle Brown Ale will now be produced less than three miles from Tutor2u’s Head Office! On a good day and with the wind in the right direction, the head wafts of Brown Ale malts may well find their way into our building! AS and A2 Specifications, AQA Economics Unit 2, AS Macro, Business Economics, UK Economy, Regional Economics, Recession Watch, Unemployment, 2010-05-21T15:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/irelands-gnp-and-the-debt-crisis http://www.tutor2u.net/blog/index.php/economics/comments/irelands-gnp-and-the-debt-crisis#When:14:20:00Z Despite well publicised attempts to tackle an alarmingly high fiscal deficit, Ireland still has a budget shortfall in excess of ten per cent of national income and a high accumulated national debt measured as a percentage of GDP. But the true situation may be much worse. Low corporate taxes encouraged sizeable inflows of FDI especially from North America, the result being that Ireland’s GDP is much larger than her GNP - a better measure of the national income generated by Irish-owned economic assets. Government borrowing measured against GNP is very large indeed. And Ireland along with countries such as Greece, Portugal and Spain is mired in the classic debt-growth trap - how can it achieve fiscal austerity when national output and real incomes are falling. Simon Johnson is strong on this issue today - the dangers of sovereign debt “Debt overhangs hurt growth for many reasons: business is nervous that taxes will go up in the near future, the cost of credit is high throughout society, and social turmoil looms because continued austere policies are needed to reduce the debt.” More here AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Macroeconomic Policies, Fiscal Policy, OECD Economies, Ireland Economy, Recession Watch, Credit Crunch, 2010-05-21T14:20:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/japanese-economy-exports-up-but-debt-squeeze-tightens http://www.tutor2u.net/blog/index.php/economics/comments/japanese-economy-exports-up-but-debt-squeeze-tightens#When:14:23:00Z Here are two useful update articles on some of the issues facing the Japanese economy. First, the BBC reports on an IMF study that urges the Japanese to take immediate steps to cut their national debt which “at nearly 230% of GDP, is the highest of any industrialised nation.” The IMF believes that economic growth is sufficiently robust at present to take some of the tough fiscal consolidation measures needed. (In contrast to the situation in the UK?). Second, a report that finds that Japanese exports are providing a kick-start to hopes of a recovery in GDP as “emerging Asian markets such as China have been driving Japan’s economy.” Faster growth will be key to Japan breaking free from the latest bout of consumer price deflation. The UK too is hoping for an export-led recovery in the second half of 2010 and well into 2011 but a dark cloud on the horizon are fears that financial turbulence in the Euro Zone will cause the Euro Zone economy to fall back into recession and the pound to appreciate against the Euro - both factors would hit British exporters looking to grow sales in a region that accounts for well over fifty per cent of our trade in goods and services. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Global Economy, IMF, Macroeconomic Policies, OECD Economies, Japan Economy, UK Economy, Recession Watch, 2010-05-20T14:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/labour-shortages-in-a-recession http://www.tutor2u.net/blog/index.php/economics/comments/labour-shortages-in-a-recession#When:09:52:02Z Despite unemployment being over 2.5 million (using the labour force survey) the British economy still suffers from labour shortages. These may become a constraint on the recovery as output and employment picks up. The CBI have published a new report on structural weaknesses in the labour market - reported here by the BBC. “Despite the recession, nearly half of employers said they were already having difficulty recruiting staff with skills in science, technology, engineering and maths, with manufacturers and science-related businesses finding it hardest to find staff.” This raises important questions about skills gaps in the economy and also the proposal to put an annual cap on inward migration. What happens if the cap has been reached and a business cannot fulfill a key export order for want of getting the vital workers they need? Are caps on labour migration a root cause of government failure? As my chart shows, the regular survey of recruitment difficulties from the British Chamber of Commerce finds that the percentage of manufacturing and service sector businesses reporting problems in getting the workers they need has dropped during the recession, but remains appreciably above the level seen at the end of the last downturn in the early 1990s. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, Labour Market, UK Economy, Recession Watch, Unemployment, 2010-05-17T09:52:02+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-financial-crisis-and-beyond http://www.tutor2u.net/blog/index.php/economics/comments/the-financial-crisis-and-beyond#When:08:48:00Z Modern economies run on credit and so the collapse in confidence and lending within the international financial system in 2007-09 was bound to bring about a series of after-shocks to global demand, trade and jobs. In this sense, the economic and political crisis in Greece represents a stark example of the ripple effects of the credit crunch as we edge our way forward in an age of instability. This to me was the key theme running through David Smith’s talk at the Keynes Society on Thursday night. Followers of David’s columns in the Sunday Times will appreciate his unerring ability to capture the essence of what really matters in the economics and business domain. In his presentation David’s narrative provided a tremendously clear overview of the background to the crisis, the shape of the inevitable recession that followed. And, more pertinently, prospects for the UK economy in 2011 and beyond. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, Cycles and Shocks, Financial Markets, OECD Economies, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-05-06T08:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-a2-revision-where-next-for-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/as-a2-revision-where-next-for-the-uk-economy#When:06:44:00Z Students wanting to demonstrate up-to-date understanding of the UK economy should find this streamed revision presentation really useful.  It was delivered by Geoff at our AS & A2 Economics workshops in London & Manchester.  It provides a comprehensive coverage of recent developments in the UK economy and highlights some potential downsides and upsides as the economy attempts to sustain a recovery during 2010 and 2011. Has the era of macro economic stability been replaced by a new phase of macro economic uncertainty, slower growth and a recovery constrained by debt? Or are there grounds for being more optimistic about the near-term future for the British economy? Revision Presentation on the UK Economy AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR AS Economics Unit F582, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Capital Investment, Consumer Spending, Saving, Aggregate Supply, Economic Growth, Exchange Rates, Inflation and Deflation, International Trade, Macroeconomic Policies, Fiscal Policy, Monetary Policy, Supply-side policies, Trade Policies, Keynesian Economics, Manufacturing Industry, Monetarism, UK Economy, Recession Watch, 2010-05-02T06:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/business-profits-and-the-recession http://www.tutor2u.net/blog/index.php/economics/comments/business-profits-and-the-recession#When:20:03:00Z In previous economic recessions in Britain, the profits of businesses large and small have taken a big hit and have contributed to sizeable and damaging cut-backs in employment. One of the interesting features of the most recent downturn (in which GDP has fallen by more than 6 per cent) is that corporate profitability has been resilient in the face of a contracting economy. Yes there have been many high profile causalities notably in retailing and financial services. But the overall picture is that profits have stayed quite high. There are appear to be several reasons AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, UK Economy, Recession Watch, 2010-05-01T20:03:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/issues-and-prospects-for-the-uk-economy-in-2010 http://www.tutor2u.net/blog/index.php/economics/comments/issues-and-prospects-for-the-uk-economy-in-2010#When:11:18:00Z Here are some notes from a presentation on some current issues affecting the UK economy - suitable I hope for AS and A2 macroeconomics courses and students preparing for their June 2010 papers. We will make the full presentation available late and this blog post links to many of our other recent blogs on UK and global macroeconomic issues. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Cycles and Shocks, Macroeconomic Policies, Fiscal Policy, Monetary Policy, Teaching of Economics, UK Economy, Recession Watch, Unemployment, Credit Crunch, 2010-04-25T11:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/capacity-utilisation http://www.tutor2u.net/blog/index.php/economics/comments/capacity-utilisation#When:08:07:00Z Capacity utilisation is a macroeconomic term that is now commonly used in AS macro exam questions. It measures how much of the productive potential of the economy is being used at a given point in an economic cycle. Capacity utilisation falls during a recession because of falling aggregate demand for goods and services. The result is that scarce resources of land, labour and capital are not being used to their full extent. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, AS Macro, Cycles and Shocks, Aggregate Demand, Aggregate Supply, GCSE Economics, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, 2010-04-25T08:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/animal-spirits http://www.tutor2u.net/blog/index.php/economics/comments/animal-spirits#When:07:52:00Z Animal spirits refers to the state of confidence or pessimism held by consumers and businesses. Expectations for the future inevitably influence decisions made today about how much consumers are prepared to spend or save and the willingness of businesses to commit funds towards capital investment in their chosen markets. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, A2 Macro, AS Macro, Behavioural Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Consumer Spending, Saving, Macroeconomic Policies, Keynesian Economics, Teaching of Economics, UK Economy, Recession Watch, 2010-04-25T07:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/lessons-for-the-uk-from-the-irish-recession http://www.tutor2u.net/blog/index.php/economics/comments/lessons-for-the-uk-from-the-irish-recession#When:19:53:00Z Stephanie Flanders offers this timely and well-judged piece from the Irish Republic about how the former celtic-tiger ecoonmy has adjusted to the painful medicine of fiscal austerity after their deep economic recession. She asks what lessons there might be for the political parties fighting the UK election. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, A2 Macro, AS Macro, European Economy, The Euro, OECD Economies, Ireland Economy, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-04-10T19:53:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/uk-economy-in-2010-essential-revision-presentation http://www.tutor2u.net/blog/index.php/economics/comments/uk-economy-in-2010-essential-revision-presentation#When:11:42:00Z Many thanks to Geoff for producing this superb 51-slide analysis and evaluation of the prospects for the UK Economy in 2010.  Updated to 25 March 2010 with the latest available data. AS and A2 Specifications, Economics Presentations, A2 Macro, AS Macro, Cycles and Shocks, Inflation and Deflation, Labour Market, Macroeconomic Policies, Fiscal Policy, Monetary Policy, UK Economy, Recession Watch, Unemployment, 2010-03-26T11:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/nissan-turns-over-a-new-leaf http://www.tutor2u.net/blog/index.php/economics/comments/nissan-turns-over-a-new-leaf#When:12:14:00Z This is a hugely important announcement and boost for the North east economy whose long term future must be built on competitive advantages in the emerging low-carbon industries of tomorrow. The decision to manufacture the lithium-iron batteries used in the Leaf electric cars is the key to the employment creation effects of the new investment by Nissan. Note too the role played by government financial support. The investment is backed by a £20.7m government grant and up to £220m from the European Investment Bank. The Nissan car plant is the most productive in the European Union. The plant opened in 1984 and has so far built 5.6 million cars. It produced a third of all cars built in Britain in 2009.  Digby Jones sings the praises of businesses such as Nissan in this super interview on the Politics programme a few days ago. A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Economic Growth, European Economy, GCSE Economics, Government Intervention, Subsidies, Manufacturing Industry, OECD Economies, Teaching of Economics, Transport Economics, UK Economy, Regional Economics, Recession Watch, Unemployment, 2010-03-18T12:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/is-70-of-the-world-economy-in-a-liquidity-trap http://www.tutor2u.net/blog/index.php/economics/comments/is-70-of-the-world-economy-in-a-liquidity-trap#When:11:33:00Z Paul Krugman expands on the nature of the liquidity trap and why more of the world economy might be in this situation than is commonly supposed. His opening paragraph raises an interesting question for A2 economists - does a liquidity trap encourage protectionist policies and heighten the risks of a period of prolonged de-globalisation? “Being in a liquidity trap reverses many of the usual rules of economic policy. Virtue becomes vice: attempts to save more actually make us poorer, in both the short and the long run. Prudence becomes folly: a stern determination to balance budgets and avoid any risk of inflation is the road to disaster. Mercantilism works: countries that subsidize exports and restrict imports actually do gain at their trading partners’ expense.” More here A2 Macro, Global Economy, Credit Crunch, Macroeconomic Policies, Monetary Policy, Teaching of Economics, Recession Watch, 2010-03-18T11:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/pigs-or-brics-which-is-most-important-for-uk-exports-this-year http://www.tutor2u.net/blog/index.php/economics/comments/pigs-or-brics-which-is-most-important-for-uk-exports-this-year#When:10:28:00Z The PIGS - Portugal, Italy, Greece and Spain - are in economic turmoil and likely to experience weak growth in the near term. A contrast to the BRICs - Brazil, Russia, India and China - three of whom are already seeing a ramping up of their growth rates as the world economic cycle turns. But which group is more important for the UK export sector? Chris Giles from the Financial Times has the answer here and his blog provides a useful evaluation point for AS and A2 macroeconomics students. A2 Macro, AS Macro, Emerging Economies, Brazil Economy, China Economy, Indian economy, Russia Economy, Cycles and Shocks, Aggregate Demand, European Economy, Teaching of Economics, UK Economy, Recession Watch, 2010-03-18T10:28:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/now-and-the-1930s-great-blog http://www.tutor2u.net/blog/index.php/economics/comments/now-and-the-1930s-great-blog#When:00:02:00Z A hat tip to Diane Coyle for flagging up this superb blog update from Barry Eichengreen and Kevin O’Rourke comparing today’s global crisis to the Great Depression - fantastic for students of economic history. A2 Macro, AS Macro, Cycles and Shocks, Economic History, Global Economy, Credit Crunch, Macroeconomic Policies, Teaching of Economics, Recession Watch, 2010-03-09T00:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/recession-hits-vulnerable-low-income-families http://www.tutor2u.net/blog/index.php/economics/comments/recession-hits-vulnerable-low-income-families#When:12:13:00Z Recessions have macroeconomic effects - a topical discussion at the moment is the impact of the slump on the UK economy’s productive capacity and underlying growth rate - but the effects on individuals, families and local groups can often be over-looked by the broader macroeconomic debates. This news article refers to new research highlighting the damage caused by the recession on younger people whose pay and jobs are vulnerable. These groups 1/ Are at higher risk of having to accept cuts in their money and real wages 2/ Are more exposed to a reduction in working hours and therefore lower weekly gross incomes 3/ Many have a personal inflation rate higher than the published data for CPI and RPI 4/ Have higher levels of unsecured household debt on which interest rates have risen in recent years and not fallen It also focuses on just how little people on below-average incomes can afford to save. “More than half of people on low incomes have less than one month’s salary saved and 40pc are not saving into a pension, while 53pc have unsecured debts, averaging £5,200.” More here: Younger workers hit hardest by the recesssion, says think tank A2 Macro, AS Macro, GCSE Economics, Standard of Living, Teaching of Economics, UK Economy, Recession Watch, Unemployment, Credit Crunch, 2010-03-08T12:13:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/kaletsky-on-the-benefits-of-a-weak-pound http://www.tutor2u.net/blog/index.php/economics/comments/kaletsky-on-the-benefits-of-a-weak-pound#When:12:01:00Z Anatole Kaletsky writes from Japan in today’s Times and discusses the benefits that flow from having a weaker exchange rate. “A weak currency is something to be desired and encouraged during periods of recession, when employment output need additional stimulus. A strong currency, on the other hand, is desirable during boom periods, when economic activity needs to be restrained to prevent inflation. Right now, every big economy in the world, with the possible exception of China, needs extra stimulus — and therefore wants to have a weak currency. But that, of course, is impossible, since for every currency that weakens, another currency must go up.” The conventional benefits are well explained in the article and there is reference to the Chairman of Komatsu who is now relieved that the UK did not join the Euro several years ago - but whose equipment can now be exported from their UK manufacturing base to the rest of the European Union at an ultra competitive price. UK financial services are also reaping the rewards of a weak sterling / dollar or euro rate since they bill their clients in dollars or euros but have a cost base in sterling (that is if they choose to remain in the UK!) More here: Rejoice – the pound is down again A2 Macro, AS Macro, Business Economics, European Economy, The Euro, Exchange Rates, Manufacturing Industry, Teaching of Economics, UK Economy, Recession Watch, 2010-03-08T12:01:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/intergenerational-injustice http://www.tutor2u.net/blog/index.php/economics/comments/intergenerational-injustice#When:00:33:00Z Is the younger generation picking up the economic tab for the foolishness and extravagence of the baby-boom generation born in the 1940s and 1950s (and early 1960s!)? Justin Rowlatt from Newsnight has this fascinating report, one that raises important questions about inter-generational equity / fairness. A2 Macro, AS Macro, Demography, Standard of Living, Teaching of Economics, Recession Watch, Credit Crunch, 2010-03-06T00:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/trade-as-a-stimulus-for-recovery http://www.tutor2u.net/blog/index.php/economics/comments/trade-as-a-stimulus-for-recovery#When:21:26:00Z Pascal Lamy from the WTO has given a strong defence of the impact that trade can has as a stimulus for broader global economic recovery. World trade in goods and services has declined by 12% since the onset of the financial crisis but according to the WTO although there has been renewed claims of a return to protectionism, fears of a tsunami of import controls have - by and large - proved to be wide of the mark. A2 Macro, AS Macro, Emerging Economies, Cycles and Shocks, Economic Growth, Global Economy, Credit Crunch, Macroeconomic Policies, Trade Policies, OECD Economies, Teaching of Economics, UK Economy, Recession Watch, 2010-03-05T21:26:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/capitalism-a-love-story http://www.tutor2u.net/blog/index.php/economics/comments/capitalism-a-love-story#When:19:27:00Z The new Michael Moore film is due for release in the UK soon Teaching of Economics, Recession Watch, Credit Crunch, 2010-03-05T19:27:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/margins-and-risk-the-spiralling-cost-of-credit http://www.tutor2u.net/blog/index.php/economics/comments/margins-and-risk-the-spiralling-cost-of-credit#When:15:49:00Z There has never been a strong link between the policy rate decisions of the Bank of England and the interest rates charged to customers who take out unsecured loans using their credit cards. But withbase rates at 0.5% and lilkely to remain well below their neutral rate for some time to come, the chasm between this and the average of 18-19 per cent annual rate on unpaid credit card balances has rarely been wider. The lenders claim that rising debt default levels from borrowers suffering from the recession and rising unemployment has increased the risks of loans and that higher rates are the inevitable result of this. Consumer watchdogs take a less benign view and argue that the financial companies are exploiting consumers and whacking up their profit margins even during these difficult times. This BBC news video from Brian Milligan provides food for thought on the credit card issue and makes a good resource to use when teaching monetary policy and personal finance. The BBC Radio 4 Today programme also covered this issue during the week. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Financial Markets, GCSE Economics, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-02-20T15:49:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/made-in-the-north-east http://www.tutor2u.net/blog/index.php/economics/comments/made-in-the-north-east#When:20:09:00Z On the day that Corus starts to mothball the steel plant at Redcar, there is important positive news for Tyneside with an announcement that a Windfarm blade plant is to open on Tyneside with the prospect of creating 500 new jobs in the next six or seven years. And this article from the Times is also optimistic for the region if they can develop and build a new expertise and competitive edge in creative industries, tourism and low-carbon eco-jobs. A2 Macro, AS Macro, Environmental Economics, GCSE Economics, Manufacturing Industry, Teaching of Economics, UK Economy, Regional Economics, Recession Watch, Unemployment, 2010-02-19T20:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fewer-out-of-work-but-the-labour-force-is-shrinking http://www.tutor2u.net/blog/index.php/economics/comments/fewer-out-of-work-but-the-labour-force-is-shrinking#When:18:43:00Z We are perhaps towards the crest of the rise in unemployment, but there are still too many uncertainties about the economy to be confident that the peak in unemployment is within reach. And long term unemployment lags an economic recovery - the number of people out of work for at least a year has climbed to the highest level since Labour came into power in 1997. The number of people unemployed for more than 12 months rose 37,000 to 663,000. A shift back towards staying in higher education may also explain why the number of people classed as economically inactive rose 72,000 on the quarter to 8.08m, the highest since records began in 1971. A2 Macro, AS Macro, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2010-02-17T18:43:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/lively-articles-on-the-fiscal-stimulus-debate http://www.tutor2u.net/blog/index.php/economics/comments/lively-articles-on-the-fiscal-stimulus-debate#When:11:37:00Z “Around the world over the last century, the typical financial crisis caused the jobless rate to rise for almost five years, according to work by the economists Carmen Reinhart and Kenneth Rogoff.” David Leonhardt - writing in the New York Times - praises the employment effects of the Obama stimulus programme in a super piece. Judging Stimulus by Job Data Reveals Success And over at the Financial Times, the ever-readable Martin Wolf considers the thickness of the fiscal tightrope facing the US government and other leading economies. “The argument is, rather, that the benefits of the higher output today exceed the costs of debt service tomorrow ....high-income countries face huge fiscal challenges. And yes, the crisis-hit countries start from grossly unsustainable fiscal positions. But the US is not Greece. Moreover, a massive fiscal tightening today would be a grave error.” More here And here is the link to last week’s feature in the Independent on the views of economist Joseph Stiglitz: The Money Man: Super-economist Joseph Stiglitz on how to fix the recession All three of these articles will stretch and challenge A2 economists wanting to understand more about the big fiscal issues facing governments at the moment. A2 Macro, AS Macro, Cycles and Shocks, Global Economy, Credit Crunch, Macroeconomic Policies, Fiscal Policy, Keynesian Economics, OECD Economies, US Economy, Teaching of Economics, UK Economy, Recession Watch, 2010-02-17T11:37:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/stimulating-times-as-and-a2-macroeconomics http://www.tutor2u.net/blog/index.php/economics/comments/stimulating-times-as-and-a2-macroeconomics#When:16:54:00Z A chance to cover a lesson for a colleague meant that I could bring together an AS and an A2 macro group this afternoon and I chose the issue of the Fiscal Stimulus as the basis for the lesson. One of the aims was to see the extent to which A2 students might be prompted to show a deeper understanding of the many issues related to the extraordinary attempts around the world to use fiscal policy as a tool for stabilising confidence, demand, output, investment and jobs during the crisis.  A2 Macro, AS Macro, Macroeconomic Policies, Fiscal Policy, Teaching of Economics, UK Economy, Recession Watch, 2010-02-13T16:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/evolution-of-an-economic-recovery http://www.tutor2u.net/blog/index.php/economics/comments/evolution-of-an-economic-recovery#When:16:00:00Z Where will a sustained economic recovery come from for the British economy? The Governor of the Bank of England talked last week of a battle of strength between the tailwinds from the recent macro economic policy stimulus measures set against the headwinds from continued financial fragiity in the world economy. There are some positive signs: A2 Macro, AS Macro, Cycles and Shocks, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-02-13T16:00:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/mervyn-king-on-tailwinds-and-headwinds http://www.tutor2u.net/blog/index.php/economics/comments/mervyn-king-on-tailwinds-and-headwinds#When:16:39:00Z Mervyn King delivers the latest Inflation Report from the Bank of England and focuses on the strength of two forces: 1/ The tailwind of the policy stimulus from monetary and fiscal policy 2/ The headwind of the continued deleveraging in the financial system It is a good analogy to use and one that students should be able to latch onto as they grapple with their macroeconomics. This BBC news video provides a good overview of the Bank’s current thinking.  In it the Governor explains why the Bank will - for the third time - expects to write to the Chancellor to explain an inflation overshoot. And he comes out with a good quote “Monetary policy can do little to affect short-term changes in inflation” ....... instead it has more leverage on the growth of total spending in the economy which (relative to the supply-side capacity of the economy) affects demand-pull inflationary pressures during the economic cycle. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Inflation and Deflation, Macroeconomic Policies, Monetary Policy, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-02-10T16:39:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-keynes-and-hayek-rap http://www.tutor2u.net/blog/index.php/economics/comments/the-keynes-and-hayek-rap#When:22:59:01Z If you havent watched this yet, do give it a go!  A tremendous reaction amongst the Economics teacher community about this very funny rap on Keynes versus Hayek! Your students will love this! A2 Macro, Teaching of Economics, Recession Watch, Keynesian Economics, 2010-01-31T22:59:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-a-question-of-confidence http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-a-question-of-confidence#When:07:23:00Z This new revision presentation examines the implications of changes in consumer and business confidence for the UK economy Launch revision presentation on a Question of Confidence Download printable slide handouts Cycles and Shocks, Aggregate Demand, Capital Investment, Consumer Spending, Macroeconomic Policies, Supply-side policies, UK Economy, Recession Watch, 2010-01-29T07:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/2009-a-desperately-difficult-year-for-airlines http://www.tutor2u.net/blog/index.php/economics/comments/2009-a-desperately-difficult-year-for-airlines#When:16:40:00Z This BBC news article highlights some of the key economic challenges facing the global airline industry as we move further in 2010. IATA reports that world airline passenger traffic dropped by 3.5% from a year earlier, while freight traffic fell 10.1% as the downturn hit demand. Losses have mounted and the industry continues to have to weather many uncertainties such as the likely strength of a rebound in global tourism, freight and business travel and the volatility of aviation fuel costs. This in the week when Japanese Airlines filed for bankruptcy. IATA has forecast that airlines will lose $5.6 billion (£3.5 billion) on a net basis this year after losing $11 billion in 2009. A2 Micro, AS Micro, Market Equilibrium and Price, Elasticity of Demand, Teaching of Economics, Transport Economics, Recession Watch, 2010-01-27T16:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-24-jan-prospects-for-the-uk-economy http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-24-jan-prospects-for-the-uk-economy#When:19:17:00Z In the week ahead, official data is likely to herald an end to the recession purely in terms of quarterly changes in national output. But the macroeconomic situation remains highly uncertain with plenty of risks and potential pitfalls ahead. Here are five links on related issues: 1/ BBC news: Ernst and Young warns UK firms of ‘bumpy ride’ 2/ Independent: Back from the brink? Green shoots of recovery 3/ Observer: UK exports ‘dropped by more during recession than in any other slump’ 4/ Guardian: The recession should be over soon but happy days are a long way off 5/ The Scotsman: Why the Bank of England’s credibility is on the line A2 Macro, AS Macro, Cycles and Shocks, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-01-24T19:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-21-jan-focus-on-unemployment http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-21-jan-focus-on-unemployment#When:12:08:00Z The small (and unexpected) fall in unemployment was headline news yesterday but if you scratch beneath the surface the main explanation for the decline centred on rising part time employment and a further increase in long term youth unemployment. Economic inactivity continues to grow. Here are five links (including some BBC video coverage) of the unemployment data. 1/ BBC News (Stephanie Flanders) - Surprise fall in unemployment - see also her blog 2/ Statistics Commission - latest UK labour market data 3/ Telegraph - UK unemployment expected to rise again this year 4/ Guardian: Part-time working surges 5/ Independent: Fall in official unemployment rate masks rise in the ‘hidden jobless’ A2 Macro, AS Macro, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2010-01-21T12:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fly-in-the-ointment-for-export-led-growth http://www.tutor2u.net/blog/index.php/economics/comments/fly-in-the-ointment-for-export-led-growth#When:07:22:00Z David Smith’s weekly Economic Outlook in the Sunday Times focuses on the prospect that recovery from the recession will come from exports. He suggests that the conditions needed are in place – sterling is a significantly more competitive currency than was the case 18 months ago, there is strong recovery in world trade which is likely to last into 2011, and there is no wage inflation to spoil the competitiveness of UK export prices. The Ernst and Young Item club’s predictions for the economy over the next ten years, to be published today but much trailed through the media this weekend, will suggest that although the domestic economy will struggle to produce enough consumer demand to stimulate growth - debt-laden consumers have to recover from the shock of repaying some of their borrowing before they are prepared to spend so heavily again – growth in exports will be strong, with figures of 9%, 9.5% and 8% growth predicted for 2011 to 2014. If consumption is indeed sluggish at the same time, we can hope that imports will not be growing as fast, so that the figure for net exports improves, allowing Aggregate Demand to grow and some recovery of output to become established. A2 Macro, Balance of Payments, Cycles and Shocks, Aggregate Demand, Global Economy, Macroeconomic Policies, Trade Policies, UK Economy, Recession Watch, Unemployment, 2010-01-18T07:22:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/hundreds-of-jobs-lost-as-bosch-moves-from-wales-to-hungary http://www.tutor2u.net/blog/index.php/economics/comments/hundreds-of-jobs-lost-as-bosch-moves-from-wales-to-hungary#When:09:42:00Z The Bosch Group - a privately owned German multinational manufacturing business has announced the closure of it’s car parts factory in south Wales with the loss of hundreds of jobs. With 900 jobs going at the factory itself, the final scale of extra unemployment will be significantly higher because of the negative multiplier effects for the local and regional economy. A2 Macro, AS Macro, Business Economics, Economies of Scale, Cycles and Shocks, Aggregate Demand, European Economy, The Euro, Market Failure, Factor Immobility, OECD Economies, German Economy, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2010-01-15T09:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-13-jan-aspects-of-the-recession http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-13-jan-aspects-of-the-recession#When:18:39:00Z 1/ BBC News Hard Talk - Will 2010 see a shift in economic power to the East? 2/ BBC News - National Institute suggests that the UK recession is over see also The Times - Britain’s recession the steepest for 88 years 3/ Telegraph - Oxfam donations fall in recession 4/ Justin Wolfers / Freakonomics - In defence of GDP 5/ BBC news - German economy shrinks by 5% in 2009 - see also Latvian recession “worst in history” says economist A2 Micro, AS Macro, OECD Economies, German Economy, UK Economy, Recession Watch, 2010-01-13T18:39:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-uk-unemployment-in-2010-as-econ http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-uk-unemployment-in-2010-as-econ#When:15:30:00Z This new revision presentation provides a summary of the key AS Economics issues arising from recent UK unemployment data.  It includes many follow-up links to recent news stories and blog entries too. Launch revision presentation on UK Unemployment in 2010 (AS Econ) Download slide handout (pdf) AS and A2 Specifications, AQA Economics Unit 2, Economics Presentations, EdExcel Economics Unit 2, OCR AS Economics Unit F581, OCR AS Economics Unit F582, AS Macro, Labour Market, Teaching of Economics, UK Economy, Recession Watch, Unemployment, 2010-01-06T15:30:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cautious-consumers-fear-tax-rises http://www.tutor2u.net/blog/index.php/economics/comments/cautious-consumers-fear-tax-rises#When:10:40:00Z Consumer spending is the main short term driver of demand in the British economy so the expectations and confidence levels within the household sector will be pivotal in determing the speed of any revival in demand during 2010. The latest Nationwide Building Society consumer confidence index recorded a five point decrease in December to 69 – its biggest fall since November 2008. It seems that people are worried about being hit by higher tax burdens this year as the fiscal squeeze looms on the horizon. Higher VAT (back now to 17.5% and rumoured to be rising to 20% later in the year) and increases in national insurance contributions may be the tip of an ill-concealed fiscal iceberg. House prices are rising and unemployment is rising at a slower rate than feared a year ago. But real disposable income is the dominant factor that determines how much we can spend and the prospects for 2010 do not look good. AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, UK Economy, Recession Watch, 2010-01-06T10:40:00+00:00