Category: Economics for Business: Ch 26

Do you know what the current rate of economic growth is? Probably not. In the article below Larry Elliott argues that this may indicate that the link between economic growth and happiness has been broken and that alternative measures of GDP may be more helpful in analysing the performance of the economy.

Cameron should count on happiness Guardian (27/8/07)

Questions

1. Explain what is meant by the term ‘Index of sustainable economic welfare’.
2. Examine three factors that may raise economic welfare that are not included in a conventional measure of GDP.
3. Use the Friends of the Earth make your own ISEW site to analyse the factors that may contribute the most to economic welfare. Discuss the arguments for and against the introduction of an ISEW as an official government measure of economic welfare.

Now that Tony Blair has announced that he is to step down as Prime Minister, the media has started to consider his legacy. The two articles focus on the economic legacy. While the BBC one is quite factual in its approach, the article by Larry Elliott from the Guardian is less complementary about his legacy.

The business of Tony Blair’s decade BBC News Online (10/05/07)
Blair’s legacy: a fantasy island trying to live beyond its means at every level Guardian (14/05/07)
Blair’s economic record (video) BBC News Online (10/05/07)


Questions
1. Explain why Larry Elliott considers that we are living on a ‘fantasy island’.
2. Explain the main economic changes that have been implemented during Tony Blair’s time in office.
3. Discuss the extent to which the economic situation has improved under Tony Blair for (a) firms and (b) consumers.

As Nicolas Sarkozy takes over as President of France, he faces a difficult economic situation. Poor economic growth, worsening international competitiveness and a worrying level of unemployment and social unrest mean that he has much to do. His approach will inevitably be controversial and the extent to which he is able to implement his promised reforms may depend on how well he can carry the main stakeholders with him.

Les misérables: France’s unhappy position BBC News Online (7/5/07)


Questions
1. Explain the principal economic policies that Sarkozy has promised to implement.
2. Discuss the economic problems faced by France.
3. Analyse the economic constraints faced by Nicolas Sarkozy as he tries to implement his policies.
4. Assess the likely success of the economic policies promised by Sarkozy.

Hyperinflation in Zimbabwe is no longer news. Indeed the news below that inflation has risen to 2,200% may not even surprise us any more. However, inflation of this level should also mean similar changes in the exchange rate if purchasing power parity is to be maintained. The official exchange rate in Zimbabwe, however, hasn’t changed by anywhere near this amount and there are reports (See Scotsman article below) that the Governor of the Central Bank has even tried to portray a recent devaluation as not really a devaluation at all!

Our mutual friend The Economist (subscription) (12/4/07)
Zimbabwe inflation reaches 2,200% BBC News Online (26/4/07)
Zimbabwe’s inflation rate surges to 231,000,000% Guardian (9/10/08)
A month ago, the hospitals were overflowing. Now they lie empty Guardian (6/12/08)
Hyperinflation in Zimbabwe Wikipedia
(27/4/07)
How Zimbabwe lost control of inflation Newzimbabwe.com (11/12/09)

Questions

1. Explain, using diagrams as appropriate, how hyperinflation will affect the exchange rate in Zimbabwe.
2. Discuss the likely economic impact of not devaluing the official exchange rate in line with the level of inflation in Zimbabwe.
3. Assess possible exchange rate policies that would help reduce the level of hyperinflation in Zimbabwe.

Adam Smith is the face on the new £20 note. This could be used as an argument that economics has moved into the mainstream, but many people may not be aware of the influence that he has had on modern classical economics. The articles below may help reveal his ongoing economic influence.

What you should know about Adam Smith BBC News Online (13/03/07)
Why Brown reveres the man on the new £20 note Guardian (19/03/06)

Questions

1. Assess the impact of Adam Smith on classical economic theory.
2. Summarise the main works and theories of Adam Smith. (You may find the information in the Biz/ed Virtual Economy on Adam Smith helpful. For a complete list of works of Adam Smith, many online, see website C18 in the hotlinks section of this site.)
3. Discuss the extent to which Gordon Brown has been influenced by Adam Smith in his policies.