Category: Economics: Ch 21
Rising food prices (5.5% increase over the past year) and rising energy costs have led to a rise in overall inflation. The consumer price index rose from 2.5% in March to 3% in April, triggering concerns that the Governor of the Bank of England, Mervyn King, would have once again to write an explanatory letter to the Chancellor for inflation going over its target rate.
Biggest jump in cost of living for six years surprises the city Guardian (4/5/08)
The danger of inflation fixation Guardian (14/5/08)
Dear Alistair …. Guardian (13/5/08)
Rising food prices send inflation surging to 3% Guardian (13/5/08)
Playing the percentage game for high stakes Guardian (9/5/08)
High street prices in biggest surge since 1992 Times Online (29/5/08)
UK inflation jumps to 3% in April BBC News Online (13/5/08)
Questions
| 1. |
Explain the principal factors that led to the sharp rise in the cost of living for April. |
| 2. |
Assess the extent to which inflation may be higher for many groups in society than the consumer price index figures indicate. |
| 3. |
Discuss the extent to which an interest rate increase would help to reduce inflation in a climate of rising food and energy prices. |
Russia has been growing rapidly. Average earnings have recently been growing at 20% a year and consumption growth has not been far behind this. Moscow apparently has more ‘6-series BMWs’ than any other city in the world. With Vladimir Putin now the prime minister he has promised to rein in inflation and boost social spending on housing and infrastructure. So what are the prospects for Russia in the next decade?
Russia: giant of a new economic world order Observer (25/05/08)
Vladimir Putin pledges to transform economy of Russia into a world leader Times Online (9/05/08)
Putin in 2020 pledge on economy BBC News Online (8/05/08)
Questions
| 1. |
Assess the recent economic performance of the Russian economy. |
| 2. |
Examine the importance of oil to the Russian economy. What can the Russian government do to reduce the dependence on oil revenues? |
| 3. |
Discuss the importance of infrastructure and spending on other social capital for the development of the Russian economy. |
The Phillips Machine may, in this era of super-computers modelling the economy, appear an outdated artefact. However, when it was first unveiled at the London School of Economics in 1949 it caused a sensation. The Phillips Machine is a model of the economy which uses water, pumps, valves and, in the case of the original, an electric motor scavenged from the windscreen wiper of a Lancaster bomber. For some photos of a Phillips Machine at the Science Museum, follow the links below:
Phillip’s Economic Computer (1949)
Enginuity article (Cambridge Engineering Department)
The computer model that once explained the British economy Guardian (8/5/08)
The computer model that once explained the British economy Guardian (8/5/08) (Cartoon)
Questions
| 1. |
Explain what is meant by the term ‘economic model’. |
| 2. |
What were the limitations of the Phillips machine? Assess whether the Phillips machine could be of value to modern economists. |
| 3. |
Discuss the value of economic models to policy makers when formulating economic policy. |
The prospect of a severe recession in America has inevitably drawn parallels in the media with the Great Depression of 1929. The parallel may not be entirely appropriate in terms of scale and severity, but what lessons are there that can be learnt from the Great Depression?
Credit crunch: risk-taking Times Online (23/3/08)
America gets depressed by thoughts of 1929 revisited Times Online (23/3/08)
Lessons learnt from Great Depression Times Online (25/3/08)
Questions
| 1. |
Explain the principal causes of the Great Depression of the 1930s. |
| 2. |
Assess the parallels between the current economic situation in America and the situation preceding the Great Depression in 1929.
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| 3. |
Discuss the extent to which the recent loosening of monetary and fiscal policy in America will help reduce the likelihood of recession. |
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. |