Excellent presentation on the limits to China's future growth

http://www.slideshare.net/MoTanweer/chinas-bubble-cambridge-lecture-mt-11964149?ref=http://www.mrbrook.co.uk/

RES Economics Essay competition

HWK due Tues 13th Mar is to research question 1.

2,500 words by Monday 30th April ...

1.Africa is well-placed to achieve rapid and sustainable development in the decade ahead. Do you agree?

2.Over a million young people in the UK are unemployed. What should be done to address the problem?

3.A breakup of the euro provides the best hope for a durable recovery of the European economy. Discuss

4.To what extent can we use ideas drawn from behavioural economics to help address specific social and economic problems?

5.Manufacturing’s share of the UK economy shrank from 19% in 1998 to 12% by 2007. Does this matter and, if so, how could policy revitalise British manufacturing?

6.Is there a better way out of the debt crisis than austerity?

Feedback on EURO question + HWK 28/2/12

HWK due next week: Use my feedback below to write a perfect 30 mark answer to the question

The UK is a member of the European Union but has not adopted the euro as its currency. To what extent do the benefits of membership of a monetary union such as the Eurozone outweigh the costs?

(30 marks)

My general feedback on the essays you handed in last week is:

* Academic writing please, not journalism. No thoughts, feelings or emotions - no-one cares (sorry). Just points backed up by evidence, then explained and evaluated.

* Use current data to support your answers. Follow current economic data and keep track of it (UK vs Eurozone growth / deficit / debt % GDP, UK vs China vs India growth rates, unemployment, current account deficit etc)

* Answer the question. Lots of you wrote fascinating, well-researched paragraphs that got no marks because they didn't answer the question.

* Write balanced answers. The question required you to look at BOTH the pros and cons of Euro membership. "Evaluation" for this question means giving the other side of the question. 

* Answer structure. You MUST do a short bullet point plan before you write your answer. You can cross it out when you write your real answer. One paragraph per point. The answer format I've given you will help:

To achieve full marks, you needed 4 pros and 3 cons (or 3 pros and 4 cons). Other evaluation strategies could have included ranking the importance of your points, looking at short term vs. long term effects, or the type of country in question (small, large etc). Remember our list of generic evaluation strategies?

1. Opportunity cost

2. Short-run / long-run / time-lags

3. Magnitude of change

4. Quality / reliability of data

5. Which factor is most / least important? Why?

6. “Africa” / “Asia” / “S America” are not useful units of analysis – there’s a huge variation within them

7. Effect on different sectors of the economy (rich vs poor? Importers vs exporters? Manufacturers vs services?)

8. Trade-off between different macro-economic objectives (e.g. Phillips Curve – can’t cut inflation AND unemployment at the same time)

9. Keynesian vs Classical LR supply curve

10. Price / income elasticity of demand / supply

Punk Economics

Joe Borland passed on this YouTube video explaining the European debt crisis (from an Irish perspective - a quite Irish perspective: relating it to Catholic and Protestant approaches to guilt and forgiveness?).

http://www.youtube.com/watch?v=oAR0VRLRGHE&sns=em

Amazing charts - click on link

http://www.bbc.co.uk/news/in-pictures-16090055

'Beware of Greeks bearing bonds' - Vanity Fair, Oct 2010

This article will be the basis for the A2 Economics lesson in the last week of term. It’s quite long, but  is a devastating (and entertaining) portrayal of some of Greece's fiscal problems, and how they arose. It is written by a well-known writer on Business and Economics, Michael Lewis (his book Liar's Poker is a must-read for anyone considering investment banking as a career).

http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010  

The Unit 4 content includes government fiscal policy, taxation and macroeconomic stability. This is a highly topical example that has directly contributed to the Eurozone's current problems and the 'highly threatening' macro-economic environment we find ourselves in. As such, there could well be a question on these issues in this summer's exam.

YOUR TASK
Create a presentation on
1. Why were Greece's debts and budget deficit so much greater than they reported?
2. Why was their tax income so much lower?
3. What problems did this create for Greece?

Have a good half-term!

Fiscal union for the Euro? ‘Merkozy’ to the rescue

The Euro currently fails any test for a coherent monetary union.

The ‘convergence criteria’ for membership of the Eurozone laid down by the Maastricht treaty, whereby government deficits  should not exceed 3% of GDP and gross government debt should not exceed 60% of GDP, are no longer met by any Eurozone countries (although Germany’s ‘stability programme’ has recently brought its budget deficit within the limit).

Robert Mundell in his 1961 work on Optimal Currency Unions identified some key criteria that a successful currency union should meet:

·         Labour and capital mobility across the region

·         Wage/price flexibility across the region

·         Similar business cycles across the region

·         A risk-sharing mechanism to allow stronger members to support weaker members.

Although capital is mobile across Europe, it fails the other tests. The Eurozone has significant language and cultural barriers that lead to much lower labour mobility than, say, the USA. When the ECB put up interest rates in the first half of this year to combat inflationary pressure in France and Germany, it did so knowing it would likely hurt the growth of weaker Euro members. And the Stability & Growth Pact contained no provisions for any form of risk-sharing mechanism – indeed it explicitly contained a ‘no bail-out’ clause. This was abandoned during last year’s sovereign debt crisis, and the European Financial Stability Facility (EFSF) effectively formalises the bail-out arrangements.

So what’s the answer?

Three possibilities: muddle through, a partial break-up of the Euro, or full fiscal union. International bond investors are signalling the first alternative is unacceptable by demanding higher and higher interest rates to buy Eurozone government debt. German Chancellor Angela Merkel and French President Nicolas Sarkozy are jointly proposing full fiscal union (individual Eurozone members will lose their economic independence on decisions such as government spending), combined with strengthened bail-out arrangements via the EFSF.


A Level Business and Economics questions tend to be topical. We had prepared last year’s students for a question on the Eurozone, and the June 2011 Unit 4 Edexcel Economics A Level paper included a 30-mark question on the costs and benefits of Eurozone membership for the UK. The paper this year may include a question on the implications of full monetary and fiscal union.