The G11 HL economics students will be getting a test on all the quantitative techniques we have learned so far this year. The test will be in two weeks – Thursday 15th March or Friday 16th March depending on what set you are in. The class in one week (Thursday 8th or Friday 9th) will be given over to revising for it.
The test will not cover any of theory of the firm, but only look at areas that involve quantative analysis – linear functions and national income calculations. With reference to the economics guide (page 16 onwards) this is all the HL sections within parts 1.1, 1.3 and 2.1.
Using AD/AS diagrams show the effects of each of the following on SR equilibrium, explaining what happens to equilibrium price level, output and unemployment*:
The price of oil increases;
Firms have low business confidence;
Natural diasater has destroyed agricultural output;
Government lowers taxes on profits;
There is a large rise in the stock market;
Government eliminates subsidies on agricultural products;
A war destroys a postion of an economy’s physical capital;
There has been a sharp appreciation (strengthening) of the currency;
I stumbled across this today and I thought you’d enjoy it. It comes from Mr Clifford in San Diego, who has also shared quite a few YouTube videos covering many areas of the IB syllabus. From what I can see, thankfully, this is the only one in which he dresses as a mermaid.
Tokyo has lost its place as the world’s most expensive city in which to live as an expat, at least according to the Economist Intelligence Unit. That honour now goes to Zurich, mostly thanks to a very strong Swiss Franc (although the SFR has got weaker since the survey was conducted, so Tokyo might have regained its top spot by now). The survey looks at the costs of day-to-day life such as food, school fees, travel, entertainment and housing. Expats in Tokyo can expect to pay nearly 70% more for these things than if they lived in New York and almost three times than if they lived in Karachi – the cheapest city for an expat to live. What the survey doesn’t tell us is the differences around the world in both gross and net pay. If pay is 70% higher in Tokyo than New York, then in ‘real’ terms the cost of living is the same.
Interestingly another survey, the Mercer Survey, regularly has Luanda, Angola as the most expensive city in which to live. This is mostly due to the very high barriers to trade that exist in the city, driving up prices.
The silence is deafening. Following a whole series of talks that at stages have looked promising only to quickly break down, news of a plan of action regarding Greece’s debt crisis is conspicuous by its absence. Many news outlets have simply stopped writing about it – you sense with great relief. After all, this economic time bomb has been ticking away for nearly four years. Since that time Greece has had two large bailouts from the IMF and its European partners - €110Bn ($150Bn) in March 2010 and €130Bn ($170Bn) in October 2011.
Yet a new deadline looms. On March 20th Greece has to pay back debts of €15Bn ($20Bn), money Greece doesn’t have and can’t raise through traditional government fiscal policy channels. A deal has to be struck. Indeed that deadline might be sooner as the Greek government would need time to both pass any deal through its parliament and implement it prior to March 20th. The BBC estimates that to meet the March 20th deadline a deal must be stuck by February 15th.
Quite what that deal will be is anyone’s guess. There is certainly little willingness from either the IMF or Greece’s European partners to provide yet another bailout, unless under very onerous conditions. It is unlikely they will get their initial bailout monies back. Both Merkel of Germany and Sarkosy of France, the two main contributors to any potential bailout, are up for reelection in the coming months and giving more of their taxpayers’ money to Greece would be political suicide for both.
It looks increasingly likely that Greece will have to leave the Euro – the equivalent of Michigan leaving the USA and US$. But by doing so Greece would once again have total control over its monetary, fiscal and supply-side policies. It makes economic sense, except it’s never been done before. No one can say with any degree of certainty what the impact of a major player leaving a large single currency would be. Would the Euro survive? Would Greece survive? If it worked who might be next? Portugal? Italy? Michigan?
Whatever happens, in the meantime the rest of us sit and wait and hope. The EU is the world’s largest economy – without the EU sorting itself out the US, Japan and China have little chance of effectively recovering, which in turn impacts the rest of the world’s economy. Not since the days of Danny and Sandy has Greece meant so much to the world. On which note, I leave you with this:
Ever since I started studying economics, Japan has been used as the go-to economic cautionary tale. Today hardly an economic article is written about the US or Europe without some kind of reference to Japan’s ‘Lost Decades’ and how governments should avoid this at all costs. This is no more so than in the US media, especially the more vitriolic conservative outlets.
Having now lived in Japan for nearly two years, the picture the world likes to paint of Japan (and the world I was expecting to find) bares little resemble to my experience of the reality. I have a useful frame of reference by which to compare, having spent most of my life living in the UK and since 2005 spending virtually every school holiday in the USA. The world seems to think the Japanese are brow-beaten and defeated by two decades of stagnant economic growth and deflation. I find the opposite – a country that is self-confident and assured. The bravado and cockiness of the west is just not part of the Japanese DNA, and the west views this as some kind of weakness.
In just day-to-day living it is evident Japan is far more economically developed than either the US or UK. Take infrastructure as an example. When it comes to airports, Washington Dulles and London Heathrow are national embarrassments, whilst Tokyo Narita may not be pretty but functions exactly as an airport should. Public transport is also an unfair fight – in Japan I am yet to experience either a train or bus being more than 2 minutes late than the published schedule. In the UK a train might arrive at 9.07, as per the schedule, but only because it’s the 8.07 train running an hour late. In the US, public transport outside the main cities is virtually non-existent. When looking at other aspects of infrastructure such as internet connectivity, conditions of the roads, utilities provision, condition of schools, public hospitals, police and fire forces, Japan comes out on top every time – often by some distance.
Yet economic commentators keep referring to the ‘Lost Decades’ and how Japan’s economy has slumped since the early 1990s, comparing it unfavorably to economies such as the US and UK. In this regard, Eamonn Fingleton’s article provides a really interesting analysis of the situation. Fingleton suggests that the general perception of Japan’s economy since the the early 1990′s is false. He uses some interesting data to prove his point, such as:
Since 1990 the Japanese yen has almost doubled in value against both the US dollar and British pound.
Current unemployment rate in Japan is 4.2%, under half that of the UK and USA.
Since 1990 Japan has had a sizable balance of payment surplus (until 2011), whilst the US and UK have had sizable deficits.
Japan’s life expectancy is now five years longer than the US.
Since 1990 Japan’s GDP per capita growth has exceeded both the UK and US when properly calculated.
The conclusion is that far from viewing Japan as a cautionary tale, Japan should be used as a case-study of exactly what to do when a country’s economic fortunes start to turn. In years to come Japan could be used as the foremost example in the inevitable Keynesian revival.
Today marks the first day in the Year of the Dragon. The Dragon is one of the twelve Chinese zodiac signs and is associated with power, good fortune and authority. It is also widely considered to be the luckiest year in the Chinese calendar, and The Economist decided to crunch the numbers to put this to the test. As you’ll see below, based on increases in the Dow Jones, the Year of the Dragon has historically been a very good year – the second best in the zodiac – bringing in real returns of nearly 8%. Here’s hoping the same happens this year.
However, on closer inspection, the Year of the Dragon may not be quite the provider of good fortune as people expect. Whilst previously the Year of the Dragon has coincided with times of growing prosperity – 1952, 1964 and 2000 for example – it is a year with a decidedly chequered history. It has come in the middle of two world wars (1916 and 1940) and the start or middle of four of the great economic downturns on the last century (1904, 1928, 1976 and 1988). Yet, its greatest weakness as a year seems to be that it immediately proceeds the Year of the Snake, a year which has the uncanny ability to combine poor economic fortune (see table above) and human misery. Amongst others, the Year of the Snake was seen the worst years of the two world wars (1917 and 1941), the start of significant American action in the Vietnam War (1965), the 9/11 terrorist attacks (2001) and the Wall Street Crash (1929). Not to mention the death of Elvis (1977). So it’s something we can all look forward to.
