Tag: economic growth

Rapid economic growth in China has pushed inflation to an 11-year high of 8.7% in February 2008. This was driven significantly by higher food prices, with the price of pork rising by nearly 64%. This higher level of inflation has led to concerns that policy may need to be tightened.

Sweet and sour pork The Economist (13/3/08)
China inflation hits fresh high BBC News Online (11/3/08)
Chinese inflation alarms authorities Guardian (11/3/08)
Chinese warn on decade-high inflation Times Online (5/3/08)
Chinese inflation shoots to 11-year high Times Online (11/3/07)
China tries to apply brakes to economy Guardian (4/3/08)

Questions

1. What are the main causes of rising inflation in China?
2. Assess the extent to which policy needs to be tightened to counter the rising level of inflation in China. What would be the possible downsides of such a policy?
3. Discuss possible policy changes that could be implemented by the Chinese government to reduce the level of inflation.

GDP is quite a good measure of a nation’s production of goods and services, but it doesn’t include many other factors relating to the standard of living in an economy and for this reason, various other measures of living standards have been developed. However, there is also another issue with GDP and that relates to how best to measure a country’s economic performance. Should we use GDP per head or GDP growth? Population changes can significantly distort economic welfare and so do need to be taken into account. The article below from The Economist looks at these issues in depth and considers the best way to measure economic performance.

Grossly distorted picture The Economist (13/3/08)

Questions

1. Explain how GDP per head can fall while economic growth is rising.
2. Explain why the use of GDP per head as a measure of economic performance may lead to the definition of recession being flawed.
3. Assess the principal factors that result in economic growth and GDP per head rising together.

The Governor of the Bank of England, Mervyn King, has signalled that the next year may be the toughest for 15 years with lower economic growth than previously forecast. So, is the UK economy going off the rails?

Questions

1. Explain the main reasons why the Governor of the Bank of England expects a worse than forecast level of economic growth in 2008.
2. Discuss the extent to which a cut in interest rates will help prevent an economic slowdown. What adverse effects could follow from such a policy.
3. Discuss one other policy that the government could adopt to try to reduce the extent of the forecast slowdown in economic growth.

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.