Rustam’s economics studies.

About inflation.

2010-02-01T20:15:00.002Z

So, what is inflation?
inflation, in simple words sounds like: sustained rising in general price level.

We also have 2 types of inflation:
1) the first one is demand pull inflation: so when ot occurs?
it happens when AD risen so much(shifted to the right) at the time when economy is operating to full capacity, that we have rising in prices, rather than we have economic growth.
Or AD is rising so fast than AS, so in this case we also got inflation. BUT: if economy has a spare capacity, and rising in AD happens, we have NOT inflation, WE HAVE ECONOMIC GROWTH!

2) the second type is cost push inflation: it when AS decreasing(shifting to the left),so we have rising in the price level and also decreasing in real GDP!

How can we do to prevent or decrease inflation?

1) using fiscal policy: the government can put higher taxes or decrease gov.spending. So people will encouraged to save more rather to spend, and if nobody consumes goods and services, so therefore firms and companies have to decrease their prices, in order to make profit.

2) using monetary policy: through this policy the government can rise the interest rates, this also will encourage people to save more, therefore firms have to decrease their prices in order and bla bla bla...

So in general, if we wanna decrease the inflation rate, the government tries to make people to save in different possible ways...

To Chris!

2010-02-01T20:14:00.000Z

Mr. Chris, I finally moved to another economic group!!!!)))
Yeah!!))

MPC!!!!!!!!

2010-01-19T23:39:00.002Z

The Monetary Policy Committee (MPC) is a committee of the Bank of England, which meets every month to decide the official interest rate in the United Kingdom. It comprises:

The Governor of the Bank
The two Deputy Governors
The Executive Director for Monetary Analysis and Statistics, the Bank's Chief Economist
The Executive Director for Markets
Four external members, appointed by the Chancellor of the Exchequer for a renewable three year term

Each member has one vote of equal weight. The Governor chairs the meeting and is the last to cast his vote, which effectively acts as a casting vote in event of a tie. Representatives from the Treasury can attend the meeting, but only as non-voting observers.

Meetings are held on a Wednesday and Thursday, typically following the first Monday of each month but this is sometimes deviated from in order to interact with the quarterly inflation report process and to take into account other major commitments or to occur when there are relatively fewer data announcements. The interest rate decisions are announced at noon immediately following the Thursday meeting. Minutes of each meeting, which explain the reasons for the decision and list the votes of each member, are published on the Bank's website after a two-week delay.

In each meeting, the committee studies data relating to the UK economy, as well as the worldwide economy, presented by the Bank's economists and regional representatives. Decisions are made with a primary aim of price stability, defined by the government's inflation target, set each year in the Budget (since January 2004 the target has been 2% on the Consumer Price Index). The secondary aim of the committee is to support the government's economic policies, and targets for growth and employment.

Under the Bank of England Act 1998 the Bank's Governor must write an open letter of explanation to the Chancellor if inflation exceeds the target by more than one percentage point in either direction. On April 16, 2007, Mervyn King, wrote the first such open letter in the life of the MPC to Gordon Brown, explaining why the inflation reached 3.1 %, one point beyond the target 2 %. (BBC News)

Traditionally, it was the Treasury that set interest rates. On May 6, 1997, the Bank was granted operational responsibility to set interest rates by Gordon Brown, who was at that time the Chancellor of the Exchequer, and the guidelines for this were formally laid out in the Bank of England Act 1998. The government reserves the right to instruct the Bank on what rate to set in times of emergency.

In other words, MPC it is a special "group" of people of the bank of england. they meet every month on wensdays and thursdays to "discuss" how to control different things such as inflation rate, rate of the interest and other "rubbish".

AD/AS

2010-01-15T09:47:00.002Z

There are five main AD/AS diagrams showing:

a. demand pull inflation
b. cost push
c. economic growth s/r and l/r
d. deflation
e. macroeconomic equilibrium

Also of course negative and positive output gap.

MPC

2010-01-15T09:28:00.001Z

MPC is the Monetary Policy Committee

i will write about this later

Various Economic things

2010-01-15T09:18:00.003Z

Today i want to talk about the IMF.

This is their home page.

I quote:

The International Monetary Fund (IMF) is an organization of 186 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

I also want to talk about the ILO:

The International Labour Organization (ILO) is devoted to advancing opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity. Its main aims are to promote rights at work, encourage decent employment opportunities, enhance social protection and strengthen dialogue in handling work-related issues.
In promoting social justice and internationally recognized human and labour rights, the organization continues to pursue its founding mission that labour peace is essential to prosperity. Today, the ILO helps advance the creation of decent jobs and the kinds of economic and working conditions that give working people and business people a stake in lasting peace, prosperity and progress.

There are some notes about measuring unemployment by the ILO here

This is a video about the IMF:

chapter 6. revision.

2009-12-25T10:00:00.000Z

The application of macroeconomic policy instruments and the international economy.

Fiscal policy: the taxation and spending decisions of a government.
Monetary policy: central bank and/or government decisions on the rate of interest, the money supply and the exchange rate.
Supply-side policies: policies designed to increase aggregate supply by improving the efficiency of labour and product markets.
Reflationary: of policy measures designed to increase aggregate demand.
Deflationary: of policy measures designed to reduce aggregate demand.
The nature of fiscal policy:
A government may seek to influence aggregate demand to ensure that it matches AS and so avoid unemployment and inflation.

Definitions:
Discretionary fiscal policy: deliberate changes in government spending and taxation designed to influence aggregate demand
Automatic stabilizers: forms of government spending and taxation that change automatically to offset fluctuations in economic activity.
Economic cycle: the tendency for economic activity to fluctuate outside its trend growth rate, moving from a high level of economic activity(boom) to negative economic growth(recession).
Progressive tax: a tax that takes a higher percentage from the income of the rich.
Regressive tax: a tax that takes a greater percentage from the income of the poor.

Government spending.
Government spending, which can also be called public spending or public expenditure, can be divided into:
1) Capital expenditure on hospitals, schools, roads.
2) Current spending: on the running of public services and including, for example, teatcher’s pay and the purchase of the medicines to be used in NHS.
3) Transfer payments: money transferred from taxpayers to recipients of benefits for example, pensioners and the unemployed.
4) Debt interest payments: payments made to the holders of government debt, for example, interest paid to holders of national savings certificates.
The budget.
In the UK the chancellor of the exchequer outlines government spending proposals in three-year spending reviews and any tax changes are announced in the annual budget.

Definition:
Recession: a fall in the real GDP over a period of six months or more.

Monetary policy:
Fiscal policy and monetary policy are sometimes referred to as demand-side policies as both seek to influence AD.
The monetary policy committee.
The monetary policy committee of the Bank of England sets the rate of interest with the main objective of achieving the government’s target annual rate of inflation of 2 %, as measured by the consumer price index.
Supply-side policies.
While fiscal and monetary policies seek to influence aggregate demand, supply-side policies aim to influence aggregate supply.
Examples of supply-side policies.
Government investment in education and training and government encouragement to firms to increase their training should raise the occupational mobility of labour and labour productivity. New, small firms provide employment, develop entrepreneurial skills and introduce new ideas. As well as increasing in AD, lower direct taxation may also increase AS. There is some debate about whether the introduction of a national minimum wage or the removal of an NMW is a supply-side policy. A reduction in job seeker’s allowance will widen the gap between income from employment and the benefit. Reducing other benefits that support people who are economically inactive will increase the productive capacity of the economy if it does encourage them to enter the labour force. A reduction in trade union power may increase the efficiency of labour markets. Some economists argue that government intervention should be reduced. They believe that private sector firms are in the best position to make decisions about what to produce, how to produce and what to charge. Deregulation is the removal of rules and regulations that affect firms.

Policies to reduce unemployment.
There is a range of policy measures a government may employ to reduce unemployment.

Demand-side policies: If the economy is operating below its productive capacity, unemployment may be reduced by increasing in AD.
Supply-side policies: unemployment can exist even where there is not a shortage of AD if there are supply-side problems.

Policies to control inflation.
If a country is experiencing inflation, the measures it implements will be influenced by what is thought to be causing the inflation.
Cost-push inflation.
There is a number of policy measures a government may take to control cost-push inflation in the short-run.
Demand-pull inflation.
To reduce demand-pull inflation, a government may use deflationary fiscal and/or monetary policy instruments.

Inflation targeting.
Inflation targeting can lower the chance of both types if inflation by reducing expectations of inflation.
Long run: in the long run, a government is likely to seek to reduce the possibility of the inflationary pressure by increasing aggregate supply.
Policies to promote economic growth.
1) Short run: increases its output in the short run can occur due to increases in AD if the economy is initially producing below full capacity.
2) Long run: in the long run, increases the country’s output can continue to be achieved only if the productive capacity of the economy increases.
3) Stable growth: this objective is for actual growth to match trend growth and for that trend growth to rise over time.

Policies to improve the balance of payments.
1) Short run: in the short run there are three main ways a government may try to raise export revenue and/or reduce import expenditure in order to correct a current account deficit.
2) Exchange rate adjustment: a country may seek to reduce the exchange rate if it believes that its current level is too high and as a result is causing its products to be uncompetitive against rival countries’ products.
3) Deflationary demand management: to discourage expenditure on imports, a government may adopt deflationary fiscal and monetary policy instruments.
4) Imports restrictions: a country may seek to reduce expenditure on imports by imposing import restrictions including tariffs and quotas.
5) Long run: if a deficit arises from a lack of quality competitiveness, low labour productivity or high inflation, then reducing the value of currency, deflationary demand-side policy instruments and imports restrictions will not provide long run solutions.

Definitions:
Tariff: a tax on imports.
Quota: a limit on imports.
Human capital: education, training and experience that a worker possesses.
Current account surplus.
A balance of payments disequilibrium may also arise because of a current account surplus.
Effectiveness of fiscal policy.
Fiscal policy has a number of advantages. As we have seen, a number of taxes and forms of government spending adjust automatically to offset fluctuations in real GDP.
The effectiveness of monetary policy.
As with fiscal policy, monetary policy depends on reliable information. There is a risk that data, for instance, business confidence, may be misleading, and forecasts of trend in unemployment may be inaccurate.
The effectiveness of supply-side policies.
Supply-side policies are selective, targeted at particular markets, and are designed to raise efficiency.
Possible conflicts between policy objectives.
The objectives of economic growth and low unemployment may benefit from expansionary demand-side policy measures.
Changes in the UK’s pattern of international trade since 2000.
International trade plays an important role in influencing output, employment and the price level in the UK.
Advantages that may be gained from international trade.
International trade involves the exchange of goods and services across national borders. Being able to trade with other countries can bring a number of advantages.
Methods of protection.
Protectionism: the protection of domestic industries from foreign competition.
1) Tariffs: tariffs are the best known method of protection. They can also be referred to as customs duties or import duties.
2) Quotas: the second best known measure is probably a quota. This is a limit of a good or service.
3) Voluntary export restraint: a limit placed on imports from a country with the agreement of that country’s government.
Definition:
Occupational immobility of labour: difficulty in moving from one type of job to another.

Foreign exchange restrictions.
A government may seek to reduce imports by limiting the amount of foreign exchange made available to those wishing to by imported gods and services or to invest or to travel abroad.

Embargoes.
An embargo is a ban on the export or import of a product and/or a ban on a trade with a particular country.

Red tape.
Time-delaying customs procedures may be used to discourage imports.

Other measures.
Two additional measures are quality standards and government purchasing policies. Quality standards may be set high and complex requirements may be put in place with the intention of raising the costs of foreign firms seeking to export to the country. A government may also try to reduce imports by favoring domestic firms when it places orders, even when the domestic firms are producing at a higher cost or lower quality.

Chapter 5. Revision.

2009-12-25T09:50:00.001Z

Government economic policy objectives and indicators of national economic performance.

Key performance indicators.
One of the most important is economic growth. Short-run, or actual, economic growth is said to occur when an economy increases its output. Long-run,or potential, economic growth take place when the productive capacity of the economy increases. When a country’s output increases, usually unemployment falls. Some people between 16 and 65 are not in the labour force, because, for example, they are homemakers, disabled or have retired early. These people are said to be economically inactive and are not regarded as unemployed. A country also can experience deflation which is a sustained fall in the price level, although this is less common. A country’s external performance can be assessed by examining its balance of payments.

Definitions:
Economic growth: in the short run, an increase in real GDP, and in the long run an increase in productive capacity, that is the maximum output that the economy can produce.
Unemployment: a situation where people are out of work but are willing and able to work.
Labour force: the people who are employed and unemployed ,that is ,those who are economically active.
Economically inactive: people of working age who are neither employed nor unemployed.

Current trends.
In the UK stable economic growth has been combined with low unemployment and low and stable inflation. This has led some economists to suggest that the shape the UK’s aggregate supply curve may have changed, becoming more elastic up to the full capacity level. There are thought to be a number of reasons why the inflation rate has fallen and stayed relatively low. These include a reduction in inflationary expectations resulting from the success of the government’s monetary policy, a high value of the pound and increased global competition putting pressure on firms to keep their prices low.

Definitions:
Elastic: responsive to a change in market conditions.
Inflation rate: the percentage increase in the price level over a period of time.
Objectives of government economic policy.
Governments have always had general policy objectives for the macroeconomy but in recent years many have set more specific targets.
Economic growth.
Governments want to achieve economic growth because of the benefits it brings, including increasing material living standarts.
Definitions:
Sustainable economic growth: economic growth that can continue over tome and does not endanger future generations’ ability to expand productive capacity.
Trend growth: the expected increase in potential output over time. It is a measure of how fast the economy can grow without generating inflation.
Employment and unemployment.
Another government policy objective is high employment and low unemployment. Some governments state that their objective is full employment.
Definition:
Full employment: a situation where those wanting and able to work can find employment at the going wage rate.
Inflation.
A third macroeconomic policy objective is low and stable inflation.
Balance of payments.
In the past,governments placed considerable emphasis on achieving a satisfactory balance of payments position, particularly with respect to trade in goods and services.
Definition:
Current account deficit: when more money is leaving the country than entering it, as result of sales of its exports, income and current transfers from abroad being less than imports and income current transfers going abroad.
Economic stability.
While a satisfactory balance of payments position has been somewhat downgraded as an objective, economic stability has become more significant as an objective.

Income redistribution.
At any particular time, a government may also seek to redistribute income. This may be done in order to ensure everyone has access to basic necessities and/or to correct what is seen as an inequitable distribution of income.
Definition:
Hyperinflation: an inflation rate above 50 per cent.
GDP and real GDP.
Economists first calculate what is called money or nominal GDP. This is output measured in terms of the prices in the year in question. Then they convert nominal into real GDP(GDP adjusted for inflation). For example 800 pounds in 2008 and 880 pounds in 2009. This would appear to suggest that output has risen by: 80/8000*100%=10%
So to calculate the rise in the volume of output, the effects of changes in the price level are taken out by multiplying GDP by the base year index divided by the current year price index. So if the price index in 2008 was 100 and 104 in 2009,real GDP was 880*100/104=846.15. In real terms GDP has risen by 46.15/800*100%=5.77 per cent.
Definitions:
Nominal GDP: output measured in current prices and so not adjusted for inflation.
Labour productivity: output per worker hour.
Measuring economic growth.
Economic growth is usually measured by the annual percentage change in real GDP. As just mentonied,this is the change in the country’s output.
Production and productivity.
Production is what is produced. So,when real GDP increases, it means that output has risen.
Difficulties in interpreting changes in real GDP.
On the surface, an increase in real GDP suggests that living standarts are improving, as more goods and services are being produced.
Measuring unemployment.
Economists measure the number of people who are unemployed and from this find the unemployment rate. The unemployed*100%/labour force.

Definitions:
Informal economy: economic activity that is not recorded or registered with the authorities in order to avoid paying tax or complying with regulations,or because the activity is illegal.
Economy of scale: the advantage of producing on large scale, in the form of lower long-run average cost.
Unemployment rate: the percentage of the labour force who are out of work.
Labour force survey: a measure of unemployment based on a survey using the ILO definition of unemployment.
International labour organization: a member of organization of the united nations that collects statistics on labour market conditions and seeks to improve working conditions.
Claimant count: a measure of unemployment that includes those receiving unemployment-related benefits.
Consumer price index: a measure of changes in the price of a representative basket of consumer goods and services .Differs from the retail price index in methodology and coverage.
Difficulties of measuring unemployment.
There is no perfect measure of unemployment. Both the LFS measure and the claimant count measure have their advantages and disadvantages.
Measuring inflation.
there are number of measures of inflation. The main measure of inflation is the consumer price index(CPI). It forms the basis for the inflation target that the government requires the bank of England’s Monetary Policy Committee to achieve.
The CPI and other measures of inflation.
another measure of inflation used in the UK is the retail price index. This measure is the one used for adjusting pensions and other benefits to take account of changes in inflation and is frequently used in wage negotiations.
Difficulties of measuring inflation.
the CPI and the other measures of inflation mentioned aim to give a representative picture of what is happening to prices in a country.

The structure of the current account of the balance of payments.
The current account receives the most media attention. It includes trade in goods, trade in services, income and transfers.
The capital and financial accounts show the movement of direct investment.
The last section. Net errors and omissions, is added to ensure that the balance of payments does balance.
The causes of economic growth.
In the short run, an economy with spare capacity can experience economic growth as a result of an increase in aggregate demand. For an economy to experience economic growth in the long run its productive capacity has to increase.
The causes of unemployment.
Cyclical unemployment: unemployment arising from a lack of demand.
Structural unemployment: unemployment caused by the decline of certain industries and occupations due to changes in demand and supply.
Frictional unemployment: short term unemployment occurring when workers are in-between jobs.
The causes of inflation:
Cost push: increases in the price level caused by increases in the costs of production.
Demand pull: increases in the price level caused by increases in aggregate demand.
The causes of a deficit on the current account of the balance of payments.
A deficit on the current account occurs when the country’s expenditure abroad exceeds its revenue from abroad.
The causes of a surplus on the current account of the balance of payments.
A surplus on the current account is experienced when a country’s revenue from abroad is greater that its expenditure abroad.
The consequences of unemployment.
Unemployment can have a number of consequences for the economy, for the unemployed and for other economies.
1) Lost output: one of the most significant costs of unemployment is lost output.
2) Lost tax revenue: unemployment results in tax revenue being lower than possible. If more people were in work, incomes. Spending and possible profits would be higher.
3) Government spending on unemployment benefits: if unemployment rises, the government will have to spend more on unemployment related benefits, principally job seeker’s allowance.
4) Pressure on other forms of government spending: as well as affecting the amount the government spends on unemployment-related benefits, rising unemployment can put upward pressure on a variety of other forms of government spending.
5) Costs to the unemployment: as mentioned above, the unemployment may suffer from poor health and family break-ups. They are also likely to experience a loss of income.
6) Hysteresis: one of the costs of the unemployment can be unemployment itself. This is known as hysteresis.
Definitions:
Hysteresis: unemployment causing unemployment.
Long-term unemployment: unemployment lasting more than one year.

The costs for other economies.
Unemployment is a country’s trading partners is likely to reduce demand for its exports. This ,in turn, will reduce the country’s aggregate demand and may cause some unemployment.
The benefits of unemployment.
There are few possible benefits of unemployment. For a few people, it may give them time to search for a more rewarding job. The existence of unemployment makes it easier for firms, wishing to expand, to recruit workers, it can also reduce demand-pull and cost-push inflation.
The overall effect.
It is generally agreed that the costs of unemployment above a certain level exceed any benefits. This is why low unemployment or full employment is one of the main macroeconomic objectives pursued by governments.
The significance of unemployment.
How significant the consequences of unemployment are depends on how much unemployment there is, how long on average people are unemployed, the benefits provided to the unemployment, the type of the unemployment and the distribution of the unemployment.
The consequences of inflation.
1) Fall in the value of money: the one certain consequence is a fall in the value of money.
2) Menu costs: the costs of changing prices due to inflation.
3) Shoeleather costs: costs in terms of the extra time and effort involved in reducing money holdings.
4) Administrative costs: as well as shoe leather and menu costs, inflation can impose other administrative costs on firms.
5) Inflationary noise: the distortion of price signals caused by inflation.
6) Random redistribution of income: inflation increases the cost of living, as people have to pay more to buy the same basket of goods and services.
7) Fiscal drag: people’s income being dragged into higher tax bands as a result of tax brackets not being adjusted in the line with inflation.
8) Uncertainty: one of the most serious disadvantages of inflation, especially if its unexpected, is the uncertainty it creates.
9) Inflation causing inflation: the experience of inflation can lead people to behave in a way which causes inflation to continue.
10) Loss of international competitiveness: inflation can have a harmful effect on a country’s international trade position.
Definition:
Real interest rate: the nominal interest rate minus the inflation rate.
The benefits of inflation.
There is a possibility that inflation can bring benefits to an economy.
The significance of inflation.
The impact of inflation on an economy and its households, firms and government will depend on a number of factors. These are the rate of inflation, its cause, whether it is fluctuating, whether it was correctly anticipated and its rate relative to that of other countries.
The consequences of a deficit and a surplus on the current account of the balance of payments.
A deficit means that a country is consuming more than it is producing. The income from this extra output is going to people abroad. If a deficit increases, it will reduce the aggregate demand in the economy.
The significance of a current account deficit.
How significant a current account deficit is depends on its size, duration, cause and what is happening in the capital and financial account.
The costs of economic growth.
Economic growth can have costs. If an economy is currently using all of the resources, and thus producing on its production possibility curve, the only way it can increase its output is to switch resources from making consumer goods to making capital goods.

The benefits of economic growth.
Although there can be costs of economic growth, most governments believe thet the benefits of economic growth outweigh the costs. This is why economic growth is a key macroeconomic objective.
The sustainability of economic growth.
One of the crucial factors that has to be taken into account in deciding whether economic growth is beneficial or not is whether it is sustainable.
Determination of exchange rates.
An exchange rate is the price of one currency in terms of another currencies. the bank of England Monetary Policy Committee’s main indicator of the pound’s value is the Bank’s trade-weighted index.
A number of factors influence the demand for and supply of a currency and so its exchange rate.
1) Demand for pounds is likely to be high and supply is likely to be low if UK products are internationally competitive.
2) Changes in income abroad influence the exchange rate.
3) Rising incomes at home may put downward pressure on the value of the pound.
4) A rise in UK interest rates, relative to other countries’ interest rates, will be likely to increase demand for pounds.
5) Pounds are also bought and sold by those wishing to undertake foreign direct investment(FDI).
6) Speculation is now an important influence on the exchange rate.
Definitions:
International monetary fund(IMF): an international organization that helps co-ordinate the international monetary system.
World trade organization(WTO): an international organization that promotes free international trade and rules on international trade disputes.
Exchange rate: the price of one currency in terms of another currencies.
Monetary policy committee(MPC): a committee of the Bank of England with responsibility for setting the interest rate in order to meet the government’s inflation target.
The relationship between the exchange rate and the interest rate.
Changes in the exchange rate and interest rate are closely linked. If for instance, the UK’s exchange rate rises, exports prices expressed in terms of foreign currencies will rise.
The effect of a change in exchange rate on export and import prices.
A fall in the exchange rate, called a depreciation if caused by market forces, will reduce the price of exports in terms of foreign currencies.
Changes in the exchange rate and the macroeconomy.
A reduction in the exchange rate is likely to improve the current account position of the balance of payments. A fall in the price of exports will result in a rise in export revenue if demand is elastic. A rise in import prices will reduce the expenditure on imports, again if demand is elastic.

Chapter 4. Revision.

2009-12-25T09:48:00.000Z

Aggregate Demand and Aggregate supply and their interaction.

Aggregate Demand: is the total demand for goods and services produced in an economy at a given price level and in a fiven price period. This planned expenditure on domestic output comes from households,firms,the government and foreignes. It is made up of consumer expenditure, investment, government spending and net exports(x-m). So AD= C+I+G+(x-m)

Definitions:
Price level:the average of each of the prices of all the products produced in an economy.

Consumer expenditure: spending by households on consumer products.

Investment: spending on capital goods.

Government spending: spending by the central government and local government on goods and services.

Exports: products sold abroad.

Imports: products bought from abroad.

Net-exports - the value of exports minus the value of imports.

The components of aggregate demand.
1) consumer expenditure is also known as consumption. It is for most counrties the largest component of AD. It is spending by households on items such as clothing, food and insurance.
2)Investment is the volatile component of AD. Spending on capital goods, such as delivery vehicles, machines and office buildings.
3) Government spending is spending by the central government and local government on, for example, education,health care and the police service.It doesn't include transfer payments and job seeker's allowance and pensions.
4)net exports add forefnes' spending on the country's goods and services and deduct spending by the country's population on imports. If a country has a trade surplus, with exports being greater than imports, then adding net exports to C+I+G will increase aggregate demand. In contrast, the existence of a trade deficit would mean that aggregate demand would be lower than domestic demand.

Definitions:
Trade surplus: the value of exports exceeding the value of imports.

Trade deficit: the value of imports exceeding the value of exports.

Consumer expenditure.
There are range of influences on how much households spend.They include:
1) Real disposable income: this is the main influence on consumption. Richer households and richer economies tend to spend more in total than poorer ones.The average propensity to consume. a city banker's spending APC(spent money/disposable income) may be lower than teacher's spending APC.

2)Wealth:the more health people have(home,savings account),the more they tend to spend.Wealth can be spent and can be used to borrow against. It also results in greater consumer confidence.

3)Consumer confidence and expectations: when consumer are confident about their future,theu also spend more.

4) the rate of interest: Usually a fall in rate of interest will lead to more spendings by consumers.

5) The age of people: usually old and young people tend to spend more than middle-aged group.

6)Inflation:if people expect prices to rise in the future, they may spend their money now.

Definitions:
Disrtibution of income: how income is shared out between households in a country.
Inflation: a sustained rise in the price level
Average propensity to consume:the proportion of disposable income spent. in is consumption divided by disposable income.
net savers:people who save more than they borrow.
Wealth: a stock of assets.(property,shares,money held in savings account)

SAVINGS.
Influences on savings include:

1)real disposable income:average propensity to save rises.

2)the rate of interest:rise in it increases the reward for saving and so usually encourages people to save more.

3)confidence and expectations:people and firms are usually tend to save more,if they are not confident about their future.

4)saving schemes:when people agree to save a certain amount on a regular basis in insurance and pension schemes.

5)Government policies:a decision by the government to introduce tax-free saving schemes will encourage people to save more.

6)the age of a people: young people tend to spend more and the middle-age group of people usually save more than they spend.

Definitions:
dissave: spending more than disposable income
Savings ratio: savings as a proportion of disposable income

INVESTMENT

influences on investment include:
1)changes in real disposable income:if real disposable income increases,it is mean that demand for goods and services will also rise.

2)expectations:firms more likely to invest,if they are confident about their economic future.

3)capacity utilisation:firms are also tend to invest more if they are operating near to full capacity.

4)current profit levels:high profit levels can encourage investment in two ways:they provide finance to invest and they are likely to contribute to firms' optimism about the future.

5)corporation tax: if there is a cut in tax,firms will have more money,therefore more investment.

6)the rate of interest:a rise in interst rate likely will decrease the investment.lower demand for shares will reduce their price level and so decrease the funds that firms can raise for investment.

7)advanced technology:firms can invest money in machinery,in purpose to incsease the profit or quality of the products.

8)price of capital equipment:a reduction in capital equipment may also rise investment.

Definitions:

capacity utilisation:the extent to wich firms are using their capital goods.

corporation tax: a tax on firm's profits

ratained profits:profit kept by firms to finance investment.

unit cost: average cost per unit output.

Government spending.

1)the government's view on the extent of market failure and its ability to correct it.

2)the level of economic activity in the economy can influence government spending.

3)a desire to please the electorate. voters can put pressure on the government to spend money improving education, health care and transport infrastructure.

4)war, terrorist attacks and rising crime or their threat can also increase government spending.

Netexports

1)real disposable income abroad: a rise in income abroad is likely to result in more exports being sold.

2)real disposable income at home:a rise in income at home may result in a fall in exports.

3)the domestic price level: the value of exports may fall and the value of imports rise if domestic price level rises relative to the price levels in the country's trading partners.

4) the exchange rate:a fall in a country's exchange rate will reduce the price of exports and raise the price of imports.

5)government restrictions on free trade: a country's net exports may rise if other countries' governments remove trade resrtictions.

Definitions:
Real GDP: GDP after inflation
Gross domestic product(GDP): the total output of goods and services prodused in a country.
exchange rate:the price of one currency in terms of another currency.

The relationship between aggregate demand and the price level.

AD is inversly related to the price level. a rise in the price level causes a fall, or contraction, in aggregate demand and a fall in the price level results in a rise, or extension, in aggregate demand.
There are three effects wich explain why the AD curve is downward sloping:
1)the wealth effect:a rise in the price level reduces the purchasing power of wealth and so causes aggregate demand to contract.

2)the rate of interest effect: a fall in the price level will reduce the interst rate and cause an extention in AD due to higher consumption and investment.

3)the international trade effect: a rise in the price level assuming no change in foreign prices and the exchange rate will make the country's goods less internationaly competitive.This wold cause households and firms to buy more from foreign producres and less from domestic producers. Net exports would fall and aggregate demand would contract.

Definition
Government bond: a financial asset issued by the central or local government as a means of borroing money.

Aggregate supply

AS:is the total output of goods and services that producers in an economy are willing and able to supply at different price levels in a given time period.

Definitions:
Productivity: output,or production, of a good or service per worker per unit of a factor of production in a given time period.

Macroeconomic equlibrium: a situation where aggregate demand equals aggregate supply and real GDP is not changing.

Privatisation: transfer of assets from the publuc sector to the private sector.

Macroeconomic equlibrium.
if AD would be more than AS, there would be a shortage of goods and services.
The excess AD would encourage them to expand their output. The surplus AD may also push up the price level, depending on the leve of capacity.
AS exceeding AD would also lead to pressures that would move the economy back to eqilibrium.

The circular flow of income.
it is a model that seeks to explain how the economy works and how changes in AD occur.
In practice, not all the income that is earned is spent. There are also additional forms of spending that don't arise from the circular flow. income that is not spent on domestic output is said to leak out of the circular flow. THere are three leakages:taxes,savings,imports. Leakages reduce AD. In contrast, injections increase AD,they are:investment,government spending,exports.

Definitions.

Circular flow of income:the movement of spending and income throughout the economy.

Factor services:the services provided by the factors of production.

Leakages:withdrawals of possible spending from the circular flow of income.

Injections:additions of extra spending into the circcular flow of income.

Multiplier effect: when adding injections into the economy results in the greater rise in national income.

Multiplier effect.
occurs because when people spend money, that expenditure becomes the income of those who sell them the goods. they,in turn, will spend some of the money they recieve. so there is knock-on effect, with AD rising by more than the initial amount.

Changes in Aggregate demand.
1)if the economy is initially operating with considerable spare capacity, an increase in AD is likely to raise the output of the economy, reduce unemployment and leave the price level unchanged.

2)A rise in AD may increase both output and the prise level. This outcome occurs if either the economy moves from a position of significant spare capacity to one where there are shortages of resources or it moves from one where shortages are already being experienced to one where there are even greater shortages.

3)if the economy is already operating at the full employment level,with no spare capacity, an increase in AD will be purely inflationary.

Changes in Aggregate supply.
an increase in AS occuring when the economy is at, or close to, full capacity will raise the output of the economy and lower price the price level.
There is the possibility that an increase in AS may have no impact on the economy. This situation wouls occur if the economy was initially operating at a low level of output with a high level of unemployed resources. in this case the increase in AS will increase potential output but not actual output and will leave the price level unchanges.

Changes In AD and AS.
Over time both AD and AS increase. also investment and consumption raise. AS increases due to technologies and improved education.If increases in AS can match increases in AD, the economy can enjoy higher output without encountering inflationary pressures.If AD grows more rapidly than in productive capacity, inflation will ocur.Overheating is experiencing higher output, but this rise is coming at the cost of inflation and will not be sustainable unless AS increases at a more rapid rate.

Output Gap.
An output gap is said to exist when an economy is not producing at full capacity.A negative output gap occurs when the economy's actual output is below its potential output.A positive output gap arises when an economy's actual output is above that of its potential output.For a short time an economy may be able to rpoduce more if workers work overtime, some people who are not usually in the labour force enter it,and machinery is used flat out.It will be possible to sustain this output in the long run, unless AS increases.

Definitions.

Overheating: the growth in AD outstripping the growth in AS, resulting in inflation.

Output gap: the difference between an economy's actual and potential real GDP.

Trend growth: the expected increase in potential output over time.

Policies to promote economic growth

2009-11-30T21:44:00.005Z

A government may use some policies to promote economic growth in 3 ways:
1)Shorh run
2) long run
3)stable growth

1)Short run growth: the main aim is to increase output, this can occur due to increse in AD.
increase may be stimulated by expansionary fiscal or monetary policy. Also fiscal and monetary policies have advantage that they can increase both AS and AD. For instance, a lower rate of interest is likely to increase consumption and also investment. Therefore higer invectment will result in growth of AS. Increases in some forms of government spendings, such as education and development will also shift the AS curve to the right.

2) Long run: the growth can be achieved if only productive capacity of the economy increases. That's why changes in AS are so important. For example, for long-run growth to happen, the quality and/or quantity of resources has to increase. Measures that raise investment will increase AS. The speed of the increase in AS will depend on the amount of extra investment, its type and how efficiency it is used. To use the capital efficiency it is vital to have educated healthy workers.Investment in human capital(education,training and experience that a worker possesses) will lead in increase of the productive capacity of the economy. However,the extent to wich this occurs is influenced by the appropriateness and the quality of the investment. TO be productive, workers need a range of skills such as numeracy,literacy,ICT and personal qualities.

3) Stable growth: this is the way,which governments are seeking to promote economic growth. The target is for actual growth to match trend growth(the expected increase in potential output over time) and for that trend growth to rise over time. Governments avoid AD increasing faster than the trend growth rate permits,since this can result in the economy overheating with inflation and balance of payments problems arising. They also try to prevent AD rising more slowly than the trend growth rate, since this would mean a negative output gap developing with unemployed resources.In other words government seek to avoid economic cycles.

There is some useful video about economic growth and fiscal policy.

Obesity.

2009-11-26T19:06:00.003Z

So, what is obesity? Obesity-it is overweight. when people so fat..or in more official way you can define it as: Heavy accumulation of fat in the body's fat cells to such a serious degree that it rapidly increases the risk of obesity-associated diseases and mortality. An excellent method to measure the obesity is the body mass index(bmi). You can calculate it as your weight(kg) divided by height(m) squared. people with normal bmi are in the gap between 18-25. if your bmi is more than 30, so....be scared...you're fat!!!!
there is some statistics about how dangerous obesity can be for people's health and life expectancy.:
-70% of men and 63% of women in the UK are obese.
-obesity reduses the life time for about 9 years
-obesity causes 30000 deaths a year in the UK
So,don't eat junk food and don't drink disgusting feezy drinks!!
Why does it happen?
because:
1) changed lifestyles:people eat more,move less,mostly sitting, also the size of dishes in cafes and bistros grew up.
2) The fallen price for processed food,because of using economies of scale:this type of food cheaper that healthy and organic food.
3)calories: people eat more calories and reduced the everyday exercises.
4)A rise in relative poverty: nowadays we also have poor families, who cannot afford themselves a expensive and healthy food,so they "forced" to buy cheap and junk food(over salted and high fat)
5)biffer portions: last decade there has been an increase in portion sizes over for 30%. moreover people became addicted of fast-food,wich makes the problem of obesity more difficult.
Also there is market failure, because of negative externalities:
people are obeese,they lost their power to work, so there is less workforce in labour market.Moreover The government spends extra money on NHS to help to reduce obesity.We have at the same time information failure(wich is also one of the causes of market failure).People don't know what food is bad and what is healthy,don't sometimes realise wich food they should eat..
What the government can do to reduse obesity among people? Here is some ways to do that:
-tax on high-fat food
- give subsidy on healthy food,or reduce the cost of that meal
-persuade the food producers to decrease food sizes
-a ban on advertising junk food
- labelling on food packs,(to reduce information failure)
-Government provisions of water fountains in schools-proper hydration has an effect appetite and reduse the demand for fizzy drinks.
-increase spending on exercise programmes in school
-subsidies for cholesterol busting such as statins to reduce some of the problems associated with clinical obesity.

Peak oil theory

2009-11-20T16:24:00.002Z

Homework: peak oil theory

2009-11-10T20:56:00.002Z

The peak oil is the time when price of global petroleum extraction is reached, after which the whole rate of production declines rapidly.But the peak oil also can be reached when consumer's demand is more than oil supplied.The peak oil will also rise petrol prices.
And as in every event all the time we have optimists and pessemists.
Optimists think that peak oil theorists often underestimate the amount of oil reserves. At the same time they argue that new technologies should be improved to create new oil fields and extract oil from currently inaccessible prices.The rise in oil prices will only serve to increase the return from investing in new technology. It is argued that the current rise in oil prices has not yet been reflected in investment decisions.There is a significant time late between oil prices and investment; the current high oil prices should lead to a boom in oil investment in the near future.
Pessemists or realists,as they call themselves argue that tipping point has already been reached. if it occurs soon the rise in prices will cause an incredible problem in economical situation all over tje world.If this scenario were likely to happen it suggests there is market failure in the development of new technologies and therefore requires government intervention to speed new technologies. If,however, oil prices will stabilise it gives hope to those who believe free markets can develop the necessary technology.
It is worth noting that in 1999, the Economist, like many other economists and oil specialists predicted that oil supplies were plentiful and 'dirt cheap' oil would continue for the foreseeable future.The longer high oil prices are sustained, the more importance people will attach to peak oil theories.

Homework: economic problem

2009-10-22T22:31:00.004+01:00

Is it possible to have no scarcity?
I think yes,but in theory...: imagine you live in a separate island,you are in "paradise", you need only food and water,that's all,if that all you need,so there will be particulary no scarcity....but through a time it can become boring,just to live without fun,you will need something more,something exiting or....whatever...therefore your needs will raise with the time going,so through some time there will be scarsity of resources...
In real life,I think there will be always scarcity,and the time going the more scarcity,more needs,And in near future there will be energy crisis...Even now there is a lack of oil,and more and more firms(ex:automobile industry:more companies are making a cars with a hybride engine),the oil prices also goes up rapidly.
SO in my opinion,it is not posible to have absolutely no scarcity.

Is it likely that some wants will never be satisfied?
Yes,maybe some of the wants will never be satisfied. Because some wants(like if everyone wants to by an expensive sport car or personal plane),but it is not possible, only some of the people can afford it to themselves,because they don't have a scarsity of money.Also the majority can't buy everything they want...As it is said in the article: "But, here in the West, the more we have, the less satisfied we seem to be."

CHRIS!!!!!!!

2009-10-22T00:31:00.002+01:00

Now I have less Homework to do in blog(I've already done 2 of them)!! :-)

All the same.....again and again....Homework.... about stamps..

2009-10-21T22:44:00.003+01:00

a) Define price elasicity of demand- it is when how demand response to a change in price of a product.

b) Using the information in the article, calculate the PED for first and second class stamps.
formula= % change in Q.D./%change in price
First class stamps: was 39 p.
now 42 p.

42-39=3p +3p=+ 7.69% PED=-10% (I'm not sure about that information,if I'm wrong-sorry)

Anyway I'll calculate..

-10=% change in Q.D./ 7.69 (7.69*{-10})=-76.9
D= -76.9
Second class stamps:
was 30 p.
now 32 p. + 2p=+6.6%
-10=% change in Q.D./ 6.6% (6.6*{-10})=-66
D.=-66

c) What do the 2 numbers you have calculated tell you about the demand for the 2 products?(According to the calculations I've made, I'll explain what does it mean,but still thinking that (PED=-10%) is not right,so maybye results are wrong too,but anyway..)
It means that if price for stamps(first class) will raise,so people will stop bying them at all(anyway demand will fall a lot).If price for second class stamps will raise for 2 p, so demand will also decrease,but not so much as in the first class...

d) Why is demand for these 2 products as you have described? (Hint: Look at the factors that influence PED)
I didn't understood the question,despite I looked at factors that influence PED(tastes changed,different needs, etc.)

e) What advice would you give Royal mail about their pricing structure as a result of your calculations?
I think Royal male should increase prices steadily(not rapidly),and then look at the changes in demand, how people will react for that changes,and futher decide what to do again.
I also can suggest to do like that: the more far away you are sendind your letter,the more price for sending. maybye set ("formula"=money/per mile).What else...ermm...I don't know...(my brain is tired)...:-/

f) Why is ceteris paribus important when we are delaing with elasticity?
I think because if they will raise prices for one class it will be some kind of "dishonest"..Moreover if price for first class will raise and for second-not,so there will be a "big" gap in prices between first and the second class. people might buy mostly(or try to buy) the second class stamps,demand for second class may also decrease.

I don't know if I'm right or not,but anyway,I tried to explain that..:-)

Homework: Efficiency

2009-10-21T20:15:00.007+01:00

Insurer Zurich to cut workforce:
Up to 900 jobs could be lost at Zurich's general insurance unit in the UK after the firm said it would cut its workforce in an efficiency drive.Zurich is consulting with unions on plans to cut staff numbers by about 10% by the end of the year.The business employs 5,400 staff in 20 locations across the country but it is unclear which offices will be affected.
'Acting swiftly'-Zurich said the "decisive" restructuring would improve customer focus and help to achieve more "sustainable" growth in profits."We recognize that there are difficult times ahead for our people," said Guy Munnoch, chief executive of the firm's general insurance arm."However, it is clear that if we want to remain competitive, we must act swiftly to increase efficiencies so that we can achieve our growth plans and safeguard the future of our business in the UK."

Aviva to cut 1800 insurance jobs:
Aviva, the owner of Norwich Union, will cut up to 1,800 jobs by 2010 as it restructures its insurance operations.Aviva called the move "rationalisation" but the Unite union described the job cuts as "brutal".
Norwich Union insurance operations will be shifted away from cities including Glasgow, Leeds, Sheffield, Liverpool, Birmingham, Bristol and Southampton. The bulk of its insurance business will now operate from seven "centres of excellence" based in Norwich, Perth, Bishopbriggs, Stretford, Manchester, Leicester and Southend.
"We want to deliver excellent, consistent and reliable customer service with market leading efficiency," said the chief executive of Norwich Union Insurance, Igal Mayer.
"To achieve this we will need to fundamentally simplify our business, consolidating our expertise into seven insurance centres of the future in the UK."
Relocation 'inconceivable'-Earlier this year, Aviva, announced it was ditching the 200-year-old Norwich Union brand to forge a single identity to compete in international markets.Unite's deputy secretary, Graham Goddard, said Aviva was "rapidly withdrawing" commitment to local communities and was "isolating themselves in a small number of cities".

Write brief notes on the various types of efficiency - using your own words.
So I've read two articles and made some conclusion: as i understood, this two insurance companies are reducing the amount of workforce to make their business more effective. I want to say that if firms "cick out some unuseful staff", they probably will more properly control the work of their employees, therefore better control of the whole business. Also they will spend less money for the worker's wages...
Also I think that there is another way they made to be their business more effective.
"Earlier this year, Aviva, announced it was ditching the 200-year-old Norwich Union brand to forge a single identity to compete in international markets."- As I understood that sentence, they mergered two "small" firms to make one big company,wich could have a great competitive in the market. Because it is better to have one big firm with a huge influence instead of two small companies with particulary no influence on the market.

With reference to the articles explain what type of efficiency these job losses will lead to?
As I understood the question, it'll sound in simple words like that: what will firms have after cutting workforce? So on the part of the question I answered above. But anyway, will explain again shortly. The firm cut down on workers,so they can manipulate the staff better,moreover they will "waste" less resources on worker's salary. So less money spendings,more control,wich is making business more effective...)))

Explain why the two firms are following this course of action?
As I wrote above the possible two ways to make your business better, the best type I think is to reduce the amount of workforce,so because of that reason the both firms have chosen exactly that way of efficiency..

Homework: economic system

2009-10-20T19:20:00.004+01:00

So, the main thing what i'll be talking about is healthcare around the world and economic system.
United States - Private system.
"Private sector funded, with more than half from private sources. Private health insurance available through employer, government or private schemes.15.3% of population (45.7 million people) do not have health insurance.Also federal government is divided by two parts:
1)Medicaid - joint funded federal-state programme for certain low income and needy groups - eg children, disabled.
2)Medicare - for people 65 years old and above and some younger disabled people and those with permanent kidney failure undergoing dialysis or transplant.
Most doctors are in private practice and paid through combination of charges, discounted fees paid by private health plans, public programmes, and direct patient fees.

UK - Universal, tax-funded system.
Public sector funded by taxation and some national insurance contributions.About 11% have private health insurance. Private GP services very small. Healthcare is free of charge in point of delivery and prescription drugs (except in Wales).Exemptions include children, elderly, and unemployed. About 85% of prescriptions are exempt.

France - Social insurance system.
All legal residents covered by public health insurance funded by compulsory social health insurance contributions from employers and employees with no option to opt out.Patients pay doctor's bills and are reimbursed by sickness insurance funds.Government regulates contribution rates paid to sickness funds, sets global budgets and salaries for public hospitals. Doctors in public hospitals are salaried whilst those in private hospitals are paid on a fee-for-service basis. Most out-patient care is delivered by doctors, dentists and medical auxiliaries working in their own practices.

Singapore - Dual system.
Dual system funded by private and public sectors. Public sector provides 80% of hospital care 20% primary care. Financed by combination of taxes, employee medical benefits, compulsory savings.Patients expected to pay part of their medical expenses and to pay more for higher level of service. Government subsidises basic healthcare.Public sector health services cater for lower income groups who cannot afford private sector charges.

c. explain how the idea of economic systems can be used to explain how the various countries allocate their scarce resources to answer the 3 basic economic questions any society has to answer .
So,there is 3 types of economic systems:
1) market economic system( scarce resources allocated by force of supply and demand)
2) command economic system(scarce resources allocated by government)
3) mixed economic system(scarce resources allocated by government and market)

Also there is 3 basic questions:
1) What to produce
2) how to produce
3) whom to produce

Imagine country A and the country B. In the first country command economy ant in the other is market economy.The first one allocates scarce resources with help of the government,so it is deciding what to produce, how to produce and to whom. And in the other country that all process controls market( supply and demand).
ermmm....I think that's all...) finally finished.))

2009-10-18T20:36:00.003+01:00

Conservative economic policy

2009-10-16T01:17:00.002+01:00

Conservative economic policy.

2009-10-15T22:58:00.003+01:00

So, as the homework was to explain conservative economic policy, I’ll now take a look closer at that. I’ve made a research in internet, have read people’s blogs, and as I understood, I’ll explain...

There are two main parties in Britain, the Labour party and the Conservative party. In the Last elections the winner was a Labour party ,and now they are ruling party, with Gordon Brown as the Prime minister.

I comprehended that the main aims of that policy is to reduce taxation and spend less money on “useless things” , and at the same time increase spending on more useful areas: Conservatives emphasize the importance of increased spending on education and health services and to do that there is a need to reduce spending on unnecessary things such as ID cards, Council tax, advertising and consultancy in central government and unelected regional government since the term opportunity cost applies to government spending.

As we can see from the graph , if we reduce spending on ID cards from X to X1, we will have opportunity to increase spending on health services from Y to Y1. Opportunity cost appears because government budget is limited.

Below is several points on what Conservative party would do with taxes.

1)Freeze council taxes: Council tax is a tax based on the value on ones property, which means that the higher the value of your property/properties the higher tax you have to pay. In other words the more property you have, the more taxes for you. And also according to the Conservatives, this will save each person about 200 pounds a year. They say that “spare money” will come by reducing wasteful spending on advertising and consultancy in central government.

2) They also want to cut taxes for businesses that create new jobs. To make that plan real, they want to spend 2.6 billion pounds and think that it will create 350 000 new jobs the next year which will reduce the unemployment. Unemployment is a situation where people are out of work but are willing and able to work.

3) To reduce corporation tax. Corporation tax is a tax on a firms profit. So, a cut in the corporation tax increases the amount of profit firms can keep.

4) To give a VAT tax holidays for businesses. VAT stands for Value added tax and is a tax that is imposed on the sale on goods and services at different rates. The standard rate is 17.5%. The Conservatives implies that a VAT holiday will prevent many businesses form “hitting the wall”.

5) cut National Insurance by 1% . The national insurance is a tax paid by most people who is working. The money from the national insurance is used to pay for a number of benefits and retirement pension. According to the Conservative party a tax cut for this type will help to help immediately to small firms, who have difficulties with paying their bills. It is also estimated that it will save them up to 600 pounds.

6) raise the Inheritance Tax threshold to £1 million. Stamp duty is a tax levied on documents. Anyone who buy their first home under 250 000 pounds will pay no stamp duty. The Conservative party want to take 200 000 people out of stamp duty a year, which means one million over a parliament. This will save the average first time buyer about 2000 pounds.

Futhermore Conservatives want to save money on:

1)“The cost of social failure. Family breakdown, unemployment, drug and alcohol addiction – these social problems rack up the biggest bills for government, so we’ve got to get them down.

2)“The cost of unreformed public services. Massive top-down state monopolies cost more and deliver less, so we need to improve the running of public services through more choice, competition and non state collective provision.

Also Conservatives were for overvaluing exchange rate in order to make pound stronger against other currencies. Decisions about interest rates have to be in power of Central Bank. Conservatives put more influence on fiscal policy rather than monetary. Conservatives see government intervention as necessary tool to maintain economic growth.

Homework: Drinking by "stealth"

2009-10-14T19:27:00.005+01:00

So,I've read about stealth drinking. And there is answers on questions:
1. Explain how 'information failure' is a factor in 'market failure'.
I think this is in some way connected with negative externalities. When several years ago, for example wine contained 11% of alcohol, and nowadays it is 13% of alcohol in wine,so it's became stronger,and more harm to people's health...BUT, society do not know that there has been an increase in %-age of alcohol in wine, so it can be called 'information failure'..Producers put more alcohol in wine,more harm to people,but producers do not pay negative externalities "extra harm for people", so when they do not pay,it is called market failure..
3. Is 'stealth drinking' an example of information failure - and if so, how is this the case?
I think in our case yes. because as I said above, stealth drinking "causes" a market failure.so in some way that "type" of drinking is leading to the market failure.
4. What action could the government take to deal with stealth drinking?
I might be thinking that there is many ways of government's actions,but I'll now try to introduce one of them: The GOV. migth make the prices for strong alcohol drinks to rise, so people will less buy strong drinks, so less harm to society in whole. Or just raise taxes for producers,(who makes mostly strong drinks),therefore production of Strong drinks will be reduced..
5. Read through the article again - are there any other examples of information failure there?
"The NHS recommends a limit of three to four units of alcohol per day for men, and two to three units for women. "- People in most cases just don't know that limits of taking alcohol.
The next phrase proves that: "It comes as latest figures show a third of men and a fifth of women drink more than the recommended daily limits. " Because people do not know about that limits of alcohol,it is also an information failure,I think...))))

IMPORTANT NOTICE: I'm not sure about the graph,is it right or not..So I'll be waiting for Chris's comment...
If it is not right, "Somebody" will again call me as : "Waste of the time,energy and space."....)))))

Homework: Economic system of Hong Kong and Singapore.

2009-10-13T19:58:00.004+01:00

So,I will start to explain Singapore Economic system: It has market economic system. The main thing,wich helps a lot to economic situation is World corporations. The GDP is one of the highest on the Earth. The main production is aimed on electronics industry, ship-building and financial services. Also it is imports lots of goods from other countries,because Singapore doesn't have its own products such as water(imports water from Malaysya). And Along with Hong Kong, South Korea and Taiwan, Singapore is one of the four asian tigers. The economy heavily depended on exports and refining imported goods, especially in manufacturing. The manufacturing industry is well- diversified with electronics, petroleum refining, chemicals and biometrical sciences.Also it has the one of the busisest ports in the world, and the world's fourht largest foreign exange trading centre after London,New York and Tokyo. it is also considered to be one of the top centres of finance in the region and the world. Singapore has been rated as the most business-friendly economy in the world with thousands of foreign expatriates working in multi-national corporations.

Hong Kong is one of the world's leading financial centres. It is highly developed capitalist economy. It is an important centre of finance and trade and also it is known as one of the four asian tigers for its high growth rates and rapid industrialisation between the 1960s and 1990s.
The Hong Kong stock exange is the sixth largest in the world with a market capitalisation of US$ 2.97 trillion as of October 2007, The currency used in Hong Kong is the Hong Kong dollar, wich was connected to US dollar in 1983. The government plays a passive role in the financial industry, mostly giving the power to market forces and the private sector.The territory has little arable land and few natural resources, so it must import most of its food and raw materials.

All the same...,but something new about demand.

2009-10-10T13:00:00.002+01:00

So,as we are learning demand and supply,I would like to show here several types of demand and supply also.

1) Complementary demand: The products are used in conjunction with another.It means that if demand for one good will shift,so the demand for another complementary good will shift also.(coffe and sugar)

2)Composite demand:Demand arises from several sources.Increase in demand for one product for use in one sector will descrease the availability of the products in another sector.(elecrticity for domestic or commercial uses)

3)Сompetitive demand: the goods are substitutes to each other.if demand for one product will shift to the right,so demand for another will sift to the left.(tea or coffe)

4)Derived demand: demand for one product is derived from the demand for another product. it when one product is involved in the production of the other product.(something like complementary demand,but a little bit different).(cars and steel used to make cars)

5)Joint supply: goods are produced jointly.this means that if there are an increase in the supply for one product,will cause an increase in supply for another.(beef and leather,wich has a common source of the cow)

6)Competitive supply:This is the case where producers can produce either of two or more products.It is when supply for one good is more of one,they will produce less of another product( eggs and chiken)

Again Demand and Supply...

2009-10-08T20:24:00.005+01:00

So,I'll make a small conclusion what we've done today in economics..
now I'll choose 2-3 questions, give an answer to them and explain simply how and why..)

1) The demand for oranges following an increase in price of apples (draw demand curve)

On the graph the demand curve shifted to the right,because oranges and apples are substitutes. It means that if for one good price goes up,and for another substitute product the demand will raise(so shift to the right) Also diagram shows that quantity(of oranges)increased too and price for a oranges also went up.

2) There is a severe frost in Brazil that affects the coffee crop.

So,cuz there was a frost,the crops will ill.it means that there are less crops are grown,so less supply(shifted left).And probably people in Brazil will drink more hot coffe(because they might took a cold),so more demand for coffe).
On the graph we also can see that there are less quantity of crops, therefore price for them increased..

Chris!, Finally I've done my "economic" video...

2009-10-07T14:10:00.003+01:00

Also i forgot to say in video: social optimum- MPC+MEC=MSC (private cost+external cost=social cost)t

About...oligarchs...

2009-09-30T21:35:00.004+01:00

During the googling in the internet i stumbled on a interesting web site, where were brought about some statistics about the richest people in the world...
Oligarchs..who they are?..in my point of view this is a people how can rule all the world,who owns most of the resources in the planet of Earth..also i think, they reached that heights because they are very ntelligent, artful, bright and the most important: they hold lots of world information..And mabye you have heard, mabye not,in Russia we have something like expression: "who owns information, can rule all the world.." Also in my opinion, a progressive person must think "globally",just not to be obsessed with everyday problems and so on.. Thus, there is a conclusion: better you want to live,the more you have to know.In a simple words: if you want to have a good life- study more(economics as well)..
And here I dig up some statistics..Did you know,that only 2% of the all people in the Earth owns 50% of all riches in the world? And only 10% of all living people in the world owns almost all earth(85% of all riches on earth)..The other number of people(50%) have only 1% of all riches... So that is true..And 90% of all resources & goods are belongs to citizens of north America,Europe, and east countries(like Japan,Australia & UAE ). For instance only 10% of americans controls 70% of all goods & resources in US. The similar situation in France: 10% of citizens owns 61% of all goods in France...And if your status is more than 500000$, so be suprised:you are in among 1% of the reachest people on earth..:-)

Homework: The china effect is also having inflationary consequences for the UK economy-how?

2009-09-29T20:36:00.002+01:00

So,I'll take as a example an import of all kind of goods from China..
imagine,that China exports to UK goods,but suddenly something happens to China's economics(it can be negative economisc grouth),so china starts to produce less goods,less export to UK..But England need that goods,so therefore UK begins to produce that goods by themselves,of course it is more expensive,and coz UK spends more money to make the same goods(wich imported from China),so the all costs of goods will certainly rise,and we know: inflation-it is rising in prices. And finally UK has an inflation..

Some more information about cocaine..

2009-09-29T20:20:00.002+01:00

Also cocaine depends a lot from a exchange rates..: in 2007 year exchange ratr of a dollar fell down, and at the same time euro rised up,so it began unprofitable to drug-sellers to purvey cocaine to US,so they started to sell drugs to europe,what is much more better for them...I took that information from http://economics.about.com , and quoting that text: "It’s far from clear what caused the brief price hike in 2007... The more plausible explanation is that cocaine producers were targeting more lucrative markets. The rise of the euro and the concomitant decline of the dollar have made it less profitable to sell cocaine to Americans. Officials at the Spain conference said a kilogram of coke that would fetch $30,000 in the United States was worth $50,000 in Europe"...

Homework: “Using supply and demand analysis, explain the reasons for a rise in the price of cocaine.”

2009-09-28T22:06:00.003+01:00

So, I'll start...Now, simply I'll try to explain that 2 types of rising costs on cocaine..

The rising in cost of a cocaine could be divided in 2 parts:
1) Because of supply
2) because of demand

1) Nowadays it is popular to take hard-affecting drugs, such as cocaine,but it is harms to public,nation,generation..Therefore in most civil countries like UK,the government tries to reduce a whole quantity of a cocaine in their country..if that happens,it is getting dangerous for drug-sellers to sell cocaine, so the supply of a drugs in a whole in that country goes down, less supply,so the price goes up.

On the graph supply curve shifted left,so quantity
went down and the price went up.

2) the other thing what can make price to go up is

when drug-seller starts to sell more cocaine(or when they start to produce more cocaine), or just there is more customers who buys more cocaine,anyway there is more people buying drugs, demand goes up,so the price rises too.

On the graph you can see,that demand curve shifted right(because more people buy cocaine),so the price raised...

interesting thing:when a small problem can cause a big...,No, a huge problem...

2009-09-24T21:22:00.003+01:00

well, i've read the post in a Tom's blog about "EF has a problems with wi-fi internet",so i made some conclusions about that..

The first thing came to my head is: a kind of a tiny problem can cause through some time an unemployment, poor nation,and also bad health of a generation...

Also i took a notice: because EF has just dreadful wireless internet,students have to come to study room,waste their nerves,sitting almost 18 people in a hot room and doing their DAILY BLOG...But some of the "lazy" students will also spend their "time for study" in their rooms,have no homework,not getting new knowledge,fail exams and etc...Just students are getting bored to death with that INTERNET...and no more than ef has to spend not a lot money to provide all the students with perfect internet..but they do not do that(i don't know why),and finally,because of that EF company,exactly in Oxford,probably can have less students,less money(just can loose lots of money),and all that horrible things will happen only because of a BAD internet...therefore prestige of an ef company will slow down...

So it will better for Ef as soon as possible provide all the students with excellent wi-fi internet...

homework

2009-09-23T18:15:00.003+01:00

Let's talk about the benefits and the cost of use the biggest ship to transport! benefits: I think there will be less pollution for unit carried, also massive the capacity, because they can transport a lot of containers. Also it will reduce the price for consumer, because the cost of transport will decrease, because ship is big. therefore, labour cost will be less as well, because there are only 13 crews which this case study mentioned. Also low fuel cost per container carried. costs: Build the biggest ship must cost a lot, also if a ship is very big, the speed will be reduced because when they would like to pass some canal, for example Suez canal, they will waste a lot of time. Also one railway line needed. If they want to save money, the capacity of this ship must be full. Then, I would like talk about if UK trades with China. If UK trades with China, they can spend less money for import, also when they transport some products from China to UK, they can create jobs for transport. Also it is leading to lower cost push inflation, because the products from China is cheaper, which reduce the price of goods. However, trade with China might reduce the manufacture job in UK.
So,if trade with China probably will reduce the manufacture job in UK,therefore there will be less vacations for workers...and it can cause an unemployment in Britain...so on the other hand it is cheap to import goods from China...but i think in all things you must find a "gold middle"..

how sometimes "interesting" banks do money..

2009-09-22T20:28:00.002+01:00

So, in A country there is interesting ways to make a profit from money..imagine that it is also crisis...people do not have money,banks too,and government decides to help people..The government give lots of money to banks,in case banks after that will give to nation credits under a small rate of interest...And that do you think,what happends actually?? I will tell you: bank takes lots of money from government,and after that in stead of giving them to the nation,they just put that money into circulation....so money makes money..for example:bank recieved money in 10000 pounds from government,and then that 10000 p. bank put in circulation,and not long after bank made a profit from 10000 p. in size of 5000 pounds,so bank now has 15000 pounds. and only after that they will give these 10000 p. to nation as a credits...so finally bank made 5000 pounds from "nothing"...that's easy,isn't it???))))
another way to make easy money: for instance,russian bank takes a credit in 50000 pounds from foreign bank in Switzerland, with interest rate 5% in a year. and that 50000 p. russian bank gives as a credit to a big company with interest rate of 20 % in a year...so that company after some time have to give money back to bank in size of 60000 pounds. so it is time to bank to give back 50000+50000*0.05=52500 pounds to Switzerland bank, so from 60000 pounds they give 52500 pounds back,and russian bank has a profit of 60000-52500=7500 pounds....it is quite good,to have 7500 pounds for doing practically nothing...and again they made easy money...

ecocnomic crisis and football

2009-09-22T20:05:00.002+01:00

so,as we know every football team has it's own sponsor,who provides team with necessary money. and imagine,now is economic crisis,people do not have money,football teams do not have much money too,sponsors such as like companies can not provide their football teams,just everything is bad...But,if in case that football team has a provider such as government? so in this situation that team is just lucky,and moreover,if official interested in football,he will anyway support his favorite team, because he has a quite enough power to affect somehow on football team(for example give money, in case to support in econ. crisis).all the more,all banks are under the command of government, therefore that football team wich has a "good sponsor" will always have money, in spite of they have a big debts...

2009-09-22T20:03:00.000+01:00

2009-09-17T19:18:00.002+01:00

How does income affects to football?
So there is just simple thing about that: all over the world we have rich and not so people,i think most of them spend some of a money for a football:tickets for football matches,kit,and other things...but suddenly income of most people goes down,so what happends? rich people will go on bying tickets for match,....,....., just continue waste money.and not so rish people will start saving money by:not going to matches,do not spending money on a kit...etc..coz less people spend money,less money for football teams...so like that income of a people can affect on a football...and if that all people,maybe some of them, are fans only for a one team(foe example M.U.),and they just can not live without fotball,they will continue spend money for that, in spite of low salary..but if a football team is so popular,therefore decrease of income probably will not affect on that team...

2009-09-16T21:19:00.001+01:00

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