Category: Economics for Business: Ch 29

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.

Since the 1970s and 1980s we have moved away from an active exchange rate policy as part of an overall demand management strategy. Indeed, by the mid 2000s, even the role of fiscal policy in demand management had diminished. The article below looks at these changes and considers whether this new approach to demand management is proving effective.

It’s a fashionable club but can the MPC keep us out of the rough? Guardian (11/2/07)

Questions

1. Explain how the approach to management of the economy has changed over the last three decades.
2. Assess the problems that might arise from trying to manage the economy using just one policy instrument (i.e. interest rates)..
3. Explain what is meant by an exchange rate policy. Discuss whether the reintroduction of an exchange rate policy would help with the management of the economy.

The 300th anniversary of Scotland’s union with England was marked with renewed speculation (backed up by opinion polls) about the constitutional future of the union and a reinvigorated debate about whether Scotland should ‘go it alone’. However, could an economically independent Scotland survive? The article below considers the issues relating to an ‘economically independent’ Scotland.

Where there’s oil ……. Guardian (8/2/07)

Questions

1. Discuss the impact of North Sea Oil on the Scottish economy.
2. Assess the extent to which an independent Scotland would survive economically.
3. Discuss the changes that would take place in the fiscal position of Scotland if they were independent.

As part of its Target 2.0 competition for students, The Times published a series of briefings looking at the factors that cause inflation. The one linked below considers the role of labour markets in determining inflation.

Interplay of work and inflation rate Times Online (2/2/07)

Questions

1. Explain the key determinants of the equilibrium level of wages in the labour market.
2. Assess the role of equilibrium labour market wages in the determination of the level of inflation.
3. Discuss the extent to which the NAIRU is still a relevant theory when considering the determinants of inflation.

In a new book, Will Hutton, the editor of the Observer and well-known economic commentator, has argued that we have overstated the economic threat from China. He argues that their economic model is flawed and that extensive corruption in the system is distorting economic growth in the country. The article below from the Guardian is an edited extract from his new book that considers many of these issues.

Power, corruption and lies Guardian (8/1/07)

Questions

1. “….. the transition from communism remains fundamentally problematic”. Discuss the extent to which these problems are likely to affect the pace of development in China.
2. Explain what Will Hutton means by ‘Leninist corporatism’. Why does he believe this to be a problem for China?
3. Assess the likely impact of corruption in China on long-term development and the rate of economic growth.