The potential relevance of Keynesian economic theory has been sharply brought back into focus as governments struggle to find an appropriate mix of policies to try to avoid or mitigate the impact of recession on their economy. Chancellor Alistair Darling has relaxed fiscal rules to allow spending to rise in an attempt to boost aggregate demand and compensate for falling consumer demand.
How to kick start a faltering economy the Keynes way BBC Magazine (22/10/08)
Situation vacant: a theorist is sought to succeed Mr Keynes Guardian (11/10/08)
In praise of ….. John Maynard Keynes Guardian (9/10/08)
Spend, spend, spend: Alistair Darling adopts John Maynard Keynes doctrine Times Online (20/10/08)
Darling invokes Keynes as he eases spending rules to fight recession Guardian (20/10/08)
Follow Gordon Brown again and spend out of recession Times Online (14/10/08)
Economists condemn Chancellor Alistair Darling’s spending plan Telegraph (26/10/08)
Keynes, the man to get the Government out of a crisis The Independent (20/10/08)
Questions
| 1. |
Explain briefly the Keynesian approach to the management of the level of aggregate demand. |
| 2. |
Using diagrams as appropriate, show the impact of the relaxation of fiscal spending rules on the UK economy. |
| 3. |
Discuss the extent to which a Keynesian approach to economic policy is likely to help the government avoid a recession in the UK. Is leaving the control of interest rates in the hands of an independent Bank of England a constraint on the effectiveness of this policy approach? |
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. |
The Budget 2008 was quite an under-stated affair, but was the first delivered by Alistair Darling as Chancellor. As ever, many of the changes had been announced well in advance, reducing the element of surprise. But the Budget remains an important event. Note that the Budget websites can also be useful reference sources for economic policy changes.
Budget 2008 Guardian Budget Special
Interactive: Budget 2008 Guardian (11/03/08)
What to tell us on Budget day: where our money is going and how it can be stopped Guardian (10/03/08)
Budget 2008 BBC News Online Budget Special
Videos and podcasts
Old Mother Hubbard Guardian (13/03/08)
Budget speech in full (Video) BBC News Online (12/03/08)
For details of the Budget measures, you may want to look at:
Budget 2008 HM Treasury Budget pages HM Treasury Budget microsite HM Treasury (March 08)
Questions
| 1. |
What are the key changes in the Budget? What effects are they likely to have on the economy? |
| 2. |
Assess the extent to which this Budget can be considered a ‘Green Budget’. |
| 3. |
How has the Budget changed the overall fiscal position of the government? |
| 4. |
Discuss the likely impact of the Budget on small and large businesses. |
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. |