Autumn Statement - Fiscal tightening to continue?

Click here for a good summary:

http://www.independent.co.uk/news/uk/politics/autumn-statement-2013-at-a-glance-8985745.html


Remember your awareness of current developments in UK economy can be highly effective ine xtending analysis or evaluation concisely in the exam.

Are RBS helping slay the zombies cluttering the UK economy?

Great article on the Banking crisis or a possible solution to it:

http://www.tutor2u.net/blog/index.php/economics/comments/are-rbs-helping-slay-the-zombies-cluttering-the-uk-economy

Circular Flow of Income

A good study tool:

http://www.s-cool.co.uk/a-level/economics/aggregate-demand-and-aggregate-supply/revise-it/the-circular-flow-of-income

The Banking Crisis - how can you use the circular flow to explain why credit crunch slowed the economy down?

A complex interactive made simple - just slide the savings ratio upwards and study what happens:

http://econviz.org/macroeconomic-circular-flow-visualizer/

How do Banks that work fix this? What should you also be sliding upwards to match the increase in savings?

A2 Economics Exam

Practice Tests

There will be a one hour data response question on fiscal and supply side concepts for Unit 4 and a one hour exam question with a mix of multiple choice and data questions for Unit 3 on the following dates in the gym:

13 EC C Tues 12 Nov 1-3pm

13EC E groups Weds 13 Nov 8.45-10.50am

These tests will be completed under exam conditions, please remember to bring black pen and calculator. Please ensure you are there 10 minutes before the start of the practice test.

A2 Tax and Spend

Study Textbook  Anderton Chapters 77 and 78 and Answer worksheets 93, 94, 97 and 98 

Why Tax?
Identify key types of government spending?
Draw an indirect tax on tobacco diagram - indicate incidence of tax for producer and consumer
Produce an expansionary fiscal policy diagram and a separate contractionary diagram.
Using a Lorenz curve indicate pre and post tax lorenz curves, what has happened to the gini co-efficient?
Using two diagrams illustrate discretionary counter cyclical fiscal policies to combat positive output gap and negative output gap scenarios.
What are automatic stabilisers?
What is the multiplier?
What is The Accelerator?

Canons of Tax
How do the canons apply to a fat tax?
http://www.economicshelp.org/blog/5056/economics/pros-and-cons-of-fat-tax/

Answer Q1 and Q2 page 530 Anderton.

Essential A2 6EC04 prep: Keeping up to Speed in Development Economics

Use this highly useful Tutor2u resource:

http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-keeping-up-to-speed-in-development-economics

Remember it is essential that you apply real world examples in your analysis and evaluation so that you can provide extensive responses that Answer The Question (ATQ).

AS Balance of Payments

Study Anderton (yellow book chapter 34, purple book Chapter 32) or Powell (Chapter 22 - ignoring AS/AD analysis) on the Balance of Payments and take notes for sharing in class. Also make use of this excellent AS resource on the Balance of Payments:

http://www.economicshelp.org/blog/5776/trade/

Answer all of worksheets 92 and 93.

Using real world examples: QE Explained

For each policy used in Edexcel Economics you need to provide a real world example - usually UK for a Developed country at AS level and at A2 a Developing and Developed countries.

In looking at monetary policy check out these Videos:

BBC - http://www.bbc.co.uk/news/business-15198789

Bank of England - http://www.bankofengland.co.uk/monetarypolicy/pages/qe/default.aspx

Independent Study - comment on a specific UK Fiscal policy and UK Supply Side policy, remember to leave your name.

Unit 2 model answer - small data questions

Please take a look at the following Video I have put together for how you go about picking up the marks for 4 - 12 mark responses. I will shortly be creating ones for 30 marks and Units 1, 3 and 4. Will try to do something about the text size on new ones; in the meantime paper copies of the model answers have been distributed via AS lessons and are available to resit students.

http://www.youtube.com/playlist?list=PL6D9DF329A0D693C6

AS/A2 resources

Tutor2U always some excellent resources for Economics.

For the latest - go to:  http://www.tutor2u.net/blog/index.php/economics

For starting AS or AS re-sits PAJ has some new Videos for you - esp good on Unit 1: http://www.tutor2u.net/blog/index.php/economics/comments/phil-holden-is-back-economics-videos-online

For AS Unit 2 looking at the Growth debate check out: http://www.tutor2u.net/blog/index.php/economics/comments/conflict-growth-vrs-the-environment

ECN4 Term 6 Recall test

Based on your studies in Term 6 and over the Summer Holidays answer the following:

1.       What is different about absolute and relative Poverty ?                                                                 (4marks)

2.       Draw a Lorenz Curve with examples                                                                                        (2m)

3.        State the Gini coefficient formula                                                                                            (2 m)

4.       List 4 Causes of Poverty and Inequality                                                                                  (4m)

5.       List 4 Consequences of Poverty and Inequality                                                                   (4m)

6.       What is the difference between Growth and Development                                         (2m)

7.       What is the Harrod-Domar Growth Model?                                                                         (4m)

8.       What is the Solow Growth model?                                                                                           (4m)

9.       What are Rostow’s Stages of Growth                                                                                     (4m)

10.   What is the Lewis 2 — sector model?                                                                                      (4m)

11.   What is the dependency theory of Growth and Development?                                 (4m)

12.   What is Debt relief?                                                                                                                        (2m)

13.   What is Micro-finance?                                                                                                                                 (2m)

14.   What is a Fair Trade Scheme?                                                                                                     (2m)

15.   What is the IMF and what does it do?                                                                                     (2m)

16.   What are the World Bank’s Structural Adjustment Programmes?                              (2m)

17 How does Jubilee 2000 as a nongovernment organization  promote growth and development e.g. Jubilee 2000                                                                                                 (2m)

Total Marks                                                                                                                                        /50m 

A2 Summer Holiday Work

Summer Holiday Essay:

When faced with a monopsony (a single dominant buyer) how might coffee growers work collectively to improve their prices and incomes? Discuss (30 marks)

Further Tutor2u resources for Summer Reading:

http://www.tutor2u.net/blog/index.php/economics/tagged/tag/fair+trade/

Final Deadline - Thurs 12 Sept.

Assess your own work - using Wordle?

A great way to identify whether you are focussed on answering the question and using enough key economic terms is using wordle. Just click on the following link - create your own and copy and paste in your response:

http://www.wordle.net/

Economics Development Project Task - to do this for your own response so far.

Are you three chosen countries prominent enough?
Have you explained their HDI positions enough, whay does their HDI mean?
What about absolute and relative poverty?
Extension task - if not done so already add in Gini Coefficient; can you draw a Lorenze curve for your three countries?

New Year 12 2013-14 Economics Homework

Welcome

When looking back 81% of Economics graduates said YES they would study Economics again. Here are some links that might help motivate you:
Why Study Economics website
Interviews with students

https://www.khanacademy.org/science/microeconomics/supply-demand-equilibrium/economics-introduction/v/introduction-to-economics

For a thought-stimulating introduction to Economics look at the following:

https://www.khanacademy.org/science/microeconomics/supply-demand-equilibrium/economics-introduction/v/introduction-to-economics

Following your pre sixth lessons we would like you to complete as homework over the summer holidays the following tasks, due to be handed in first day back:

ECON 1 - Write up a report explaining the main reasons why the price of oil has fluctuated in recent years and what you expect it to do next?

ECON 2 - Write a news article on: "Using the four macro-indicators discuss the current performance of the UK Economy?"

For both pieces of work try to avoid normative (opinion based judgements) and instead use positive economics referring to research you have used, economic theories you might have discovered and economics data.

Please feel free to comment - ask for additional help.

Development Project: Which countries to choose?

Which three countries to choose?

Familiarise yourself with some of the data, discuss the results and improve your awareness and enthusiasm as a basis for investigating these countries in more depth.

Play TOP TRUMPS:

http://www.tutor2u.net/blog/index.php/economics/comments/unit-4-macro-development-indicators-top-trumps

Choose one or two NIC's:
http://www.goldmansachs.com/our-thinking/archive/archive-pdfs/brics-book/brics-chap-13.pdf
http://blogs.wsj.com/privateequity/2013/05/15/beyond-bric-the-next-breakout-stars-of-emerging-markets/

Choose one or two LEDC's:
http://en.wikipedia.org/wiki/Least_developed_country


Mr Gray

Development Project

Why are we doing this project?

Economic Development is an essential part of your Unit 4 exam and we are advised to send at least 12 hours of class time on this. You will not be required to recall numerical information or specific knowledge of individual countries studies in your project for the exam but an understanding of economic development issues through in-depth research of case studies is strongly recommended by the exam board:

Reason for Project:  “Students would benefit from using case studies as a means of illustrating the constraints facing different economies and reasons for their different growth rates.”

(exam guidance)

This is why you are doing this report and will be expected to submit your findings by the deadline to continue with your A2 studies in the next academic year.

What happened to the Bank of England competition?

We are still doing it and will start the process of selecting a team of four in September.

Can I win anything for doing this project?

If you are fast enough there is an essay competition running with a £1,000 prize. For the project we are completing we recommend you answer the following question (max 2,000 words):

Should the experience of China silence those who think that democracy is good for growth?

There are five other alternative essay titles you may wish to choose instead and get feedback from me before submitting. For more information go to: http://www.res.org.uk/view/essayEduTraining.html

What are the deadlines for this project?

Please submit work according to the deadlines and expect feedback that will help ensure your work is of most use to you for the exams. You will be expected to re-do work where it is insufficient in analysis and evaluation (using skills developed at AS level).

Week ending

21 June – Homework AS feedback plus Tasks 1 and 2

28 June – tasks 3 and 4

5 July – tasks 5 and 6

12 July – tasks 7 and 8 – Final submission

19 July – Projects marked and final feedback.

TASKS

Before you start this project it is very important that you do not lose sight of the knowledge and skills you picked up at AS Level. Please bring in your folders to sort through in lessons and identify one or a few pieces of work that you had marked and where the feedback was most useful. This will be stored by myself in a central folder and will shape your exam skills target for this project. As you will see in the pack there are a variety of essays that your knowledge and skills will be eventually tested on in the A2 exams.

Homework – bring in to your next lesson at least one piece of AS work per subject teacher with feedback you found useful.

Please note that the following tasks shape the sub-headings and notes for your project.

Task 1: Understanding Developed and Developing Countries:

What are the characteristics of an LDC (LEDC) country? http://www.tutors2u.com/rte/File/Economics/Characteristics%20of%20LDCs.pdf

What are the characteristics of a NIC country?

http://www.slideshare.net/guest0edc68/newly-industrialised-countries

What about other countries characteristics – HDC, MDC ? http://maps.unomaha.edu/Peterson/geog1000/Notes/Notes_Exam1/WorldDev.html

What problems are there with categorizing countries?

Task 2:

Investigate three countries choosing separate countries from the following continents: Africa, Asia, South America, North America and Europe. Either:

 select a post industrialised country, BRICS and LEDC; or

choose two BRICS’ (causes of rapid growth in countries such as China and India as a contrast) and an LEDC or HDC; or

select two LEDC’s and either a BRIC or HDC.

a)     Select three countries as advised above.

b)     Gather initial research from the World Bank and CIA factbook. Consider measures you think are important in measuring quality of life in the three countries.

                World Bank - http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/0,,pagePK:180619~theSitePK:136917,00.html

CIA Fact Book - https://www.cia.gov/library/publications/the-world-factbook/

c)     Recall from AS level – what is the Human Development Index and how is it measured.

d)     Obtain HDI data for three countries –

http://en.wikipedia.org/wiki/Human_Development_Index

http://hdr.undp.org/en/statistics/hdi/

Task 3: Definitions of absolute and relative

a)     Define Absolute Poverty

b)     Define Relative Poverty

c)     Gather evidence of both in the three countries of your choice.

Task 4:

Gather evidence of the causes and consequences of poverty in the countries of your choice – for example the extent to which inequality is an essential ingredient of capitalism.

Task 5

What is a Lorenz curve?

What is the Gini Coefficient?

Draw Lorenz curves from a data set for your countries and establish Gini Coefficents for them.

Task 6:

For each country consider the nature and consequences of each of the following causes of low growth rates and development

Consider factors such as:

poor infrastructure

human capital inadequacies

primary product dependency – declining terms of trade

savings gap; inadequate capital accumulation

foreign currency gap – terms of trade

capital flight – currency crashing

corruption

population issues

debt

poor governance; civil wars.

Task 7:

Understand and be able to evaluate each theory: Harrod-Domar, Solow, Rostow’s Stages of Growth, and the Lewis 2 — sector model; market orientated approaches; structural change theories; international dependence theories.

Task 8:

With reference to each country, consider which theory and following strategy might be most appropriate:

Understand and be able to evaluate each strategy, remembering that different measures will be valid depending on the nature of the country requiring assistance (for example, degree of political stability/ corruption, or sophistication of transport and communication links):

• Aid – Ethiopia’s dependence
• debt relief
• development of human capital
• inward looking/outward   looking strategies
• free market/government  intervention approaches
• industrialisation; development of tourism; agriculture
• microfinance
• impact fair trade schemes- e.g coffee
• role of international financial institutions e.g IMF and the World Bank’s Structural Adjustment Programmes (with reference to Uganda as the first ‘success’) and nongovernment organisations in promoting growth and development e.g. Jubilee 2000

Research source material: Spence Commission on Growth and Development 2008 for very useful for background and case studies

Task 9:

Project Extension:

Consider whether growth and development is actually desirable, since it may be accompanied by a number of negative externalities.

Possible exam questions

1. Discuss the advantages and disadvantages of a floating exchange rate system on the UK economy? 25 marks

Apart from the standard focus on how pounds depreciation has affected UK macro-performance; central to this question is "the perceived attractions of the floating system in comparison to the potential
weaknesses of a fixed system; the way in which central banks may be able to intervene effectively to
reduce instability and hence the potential impact on economic performance of the countries affected."

i.e. in the last recession 1988-92 UK interest rates (above 10%)had to be increased to defend sterlings fixed value. This time round the Bank of England has been able to be relaxed about sterlings fall and not having to put up interest rates; thus operating an expansionary monetary policy. However it can not be too complacent a run on the pound would need to be avoided with higher interest rates and reversing QE to prevent inflation going out of control.

2.  Discuss the economic advantages and disadvantages of the UK’s not being a member of the Euro? 25 marks

3. Explain the distinction between comparative advantage and absolute advantage. 10 marks

4. d) Extract C (lines 12 and 13) refers to a ‘virtuous circle of trade liberalisation and economic
growth’. Evaluate the case for and against greater free trade in the world today in its impact on the UK

Export multiplier
FDI - Investment Income
Comparative advantage growth theory
Competitive advantages through specialisation and economies of scale
Use of Tariff diagram analysis and evaluation ( complex or simple diagram)

5. Discuss the impact on the UK of 'the case for and against more flexibility in EU member states budget deficits’. 25 marks

UK is a member of EU - so policy would apply to UK as well

successful counter cyclical fiscal policies result in growth - UK exports?
EU member states - sovereign debt problems - crowds out private sector Investment
risks inflation across EU - 50% UK trade with EU so UK risks importing inflation so UK forced to increase interest rates if inflation is still a target.

6. Assess the impact on UK macroeconomic performance of a prolonged period of deflation. 25 marks. Ensure careful evaluation.  June 2010

A2: Evaluating Comparative Advantage Theory

Remember Comparative advantage theory is great for explaining how trade is an engine for growth by allowing countries to specialise and trade at a mutually beneficial exchange rate they can operate outside their PPF. In many ways it provides the foundation for trade liberalisation, the creation of the EU and single currency and the removal of trade barriers by the World Trade Organisation. It has allowed consumers more choice and greater consumer surplus and provided firms with the ability to source cheaper suppliers. The latter effect has created a world economy that until the credit crunch was able to lower cost push inflation, deliver target inflation and lower interest rates as a result.

However it does have its flaws: 

1.How significant is trade for macroeconomic performance?

2. Are transport costs close to zero, given rising oil prices?

3. Are currencies persistently over valued (strong pound 97-07 witnessed further decline of UK manufacturing whilst German manufacturing expanded) or under-valued (China's currency fixed low) - thus preventing mutually beneficial exchange rates, especially given frequent  speculative attacks.

4. Global imbalances - USA and UK trade deficit records compared to Germany and China's large trade surpluses does not provide evidence of win-win trade scenarios.

5. Can we identify an economy's comparative advantage, especially in a fast changing world - did the IMF/World Bank get it wrong in recommending many LEDC specialise in cash crops.

6 The theory works if we assume full employment - given a world recession, especially in UK/EU, this presents a problem and perhaps explains the resurgence of countries using protectionist measures.

7 Is competitive advantage thoery more relevant - looking at price and quality.

In addition economicsonline.co.uk offers the the following arguments and provides a good summary of the theory - click here: http://www.economicsonline.co.uk/Global_economics/Comparative_advantage.html

Criticisms

However, the principle of comparative advantage can be criticised in a several ways:

1. It may overstate the benefits of specialisation by ignoring a number of costs. These costs include transport costs and any external costs associated with trade, such as air and sea pollution.
2. The theory also assumes perfect mobility of factors without any diminishing returns. The reality may be very different. Output from factor inputs is likely to be subject to diminishing returns. This will make the PPF for each country non-linear and bowed outwards. 
3. If this is the case, complete specialisation might not generate the level of benefits that would be derived from linear PPFs. In other words, there is an increasing opportunity cost associated with increasing specialisation. For example, it may be that the maximum output of cars produced by country A is only 20 million (compared with 30), and the maximum output of trucks produced by country B might only be 16 million instead of 21 million. Hence, the combined output from trade might only be 46 million units (instead of the 51 million units initially predicted).
4. Complete specialisation might create structural unemployment as some workers cannot transfer from one sector to another.
5. Relative prices and exchange rates are not taken into account in the simple theory of comparative advantage. For example if the price of X rises relative to Y, the benefit of increasing output of X increases.
6. Comparative advantage is not a static concept - it may change over time. For example, nonrenewable resources can slowly run out, increasing the costs of production, and reducing the gains from trade.
7. Many countries strive for food security, meaning that even if they should specialise in non-food products, they still prefer to keep a minimum level of food production.
8. Finally, the principle of comparative advantage is derived from a simple two good/two country model. The real world is far more complex, with countries exporting and importing many different goods and services.
9. However, the principle of comparative advantage clearly does ‘shape’ the pattern of world trade, although most countries do try to spread their risks by diversifying into a range of goods and services, even when they do not have a clear comparative advantage.

A2 Past Exam Questions

Struggling to find additional past exam questions  - try this link:

 http://papers.xtremepapers.com/AQA/Economics/

ECN5 = ECON 3
ECN6 = ECON 4

It is really worth looking at EC4W for old EU questions and data as well.

A2: Should we leave the EU?

Tutor2u have the following good resources for this type of exam question; click here:

http://www.tutor2u.net/blog/index.php/economics/comments/uk-membership-of-the-eu-a-chance-for-students-to-make-nigel-farage-laugh-or


It is also worth considering how you can use this resource for any question concerning the EU -i.e. adavanges of EU membership and the risk of the EU breaking up as it faces difficulties with austerity measures and the Euro.

AS Economics Unit 2 Glossary

Tutor2u have a final revision resource, click here: http://www.tutor2u.net/blog/index.php/economics/comments/as-economics-macroeconomics-key-term-glossary

A2 Revision Sessions

Monday lunchtime surgeries will run from Monday 13 May - going over basic content

Tuesday after School exam skills and redo sessions

Monday 3rd June pre exam briefing ECON 3 Exam– period 1.

Tuesday 4th June 1.30pm ECON 3 Exam

Weds 5th June ECON 4 Revision period 4 and 5

Monday 10th June  pre exam briefing ECON 4 Exam– period 1.

Tue 11 June 9am ECON 4 Exam

All in Room 1

AS Revision Sessions

Unit 1
Friday 10th May; Room 1
Lunchtime: Elasticities  - understanding them and interpreting the figures; Externalities; and Supply and Demand diagram practice
Period 5 - exam techniques how it affects economic agents - Government, Consumer and Firm.

Unit 2
Getting basic content right: Tuesday 14 May - period 2 room 9 and period 3 room 1 - National Debt, Oil Price shocks etc

Ensuring exam technique is spot on: Thursday 16 may - period 1 room 11 and period 2 room 13.

Multiplier

With exams approaching fast worth thinking about the impact of government spending cuts:

http://www.youtube.com/watch?v=0CjNlyiDAno&list=PLB19E61D93CD7E354&index=2

A really good question for AS and A2 Economics.

QUESTION

Hi sir, I just have a question regarding external influences on the national economy. I don’t quite understand why it has such an influence, whilst I understand that say, if America were to go into recession it would affect our trade, but our exports make up such a small fraction of our aggregate demand, so I can’t get my head around why it has such a great effect. Could you explain some of the other outcomes if this were to happen?

Thanks, Taylor.

ANSWER

Very good evaulative points raised Taylor.

The reasoning behind the old saying: 'If America sneezes the UK catches a cold" is because some of our UK firms that are export based may risk closure and job losses. Also US decline will affect the whole world, China slows down as well, so even our trade to non US economies will be damaged. Plus the negative export multiplier effect. This may then damage confidence leading to falls in C and I.

In addition Investment Income by UK firms in USA and elsewhere will decline as well.

  

Mr Gray