Category: Essentials of Economics: 8e Ch 09, 7e Ch 08

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.

News articles can give us the impression that the world is both more warlike (with fighting in various countries) but also more peaceful and prosperous. To try to explain this confusion, an American economist with the Teal consultancy group, Richard Aboulafia, has developed a unique index; the Guns-to-Caviar Index. By mapping how much the world spends on fighter jets (guns) against how much the world spends on executive private jets (caviar) for the last 17 years, Aboulafia has given us an interesting view of the state of the world.

Obscure Economic Indicator: The Guns-to-Caviar Index MSN Slate(14/12/06)

Questions

1. What is meant by a production possibility frontier.
2. Draw a production possibility frontier to illustrate the underlying theory behind the Guns-to-Caviar index. Use the diagram to illustrate the changes that have taken place in the index during the 1990s and the early part of this century.
3. Critically assess whether the Guns-to-Caviar index can really help explain changes in the current geopolitical/economic climate.