Standards of living has improved

-General trend of increasing growth rates in real GDP and decreasing unemployment rates
-Growth in GDP shows that there is a growth in real output. Higher level of satisfaction from greater quantity of goods and services. Increases material well being, standard of living increases
-Reducing unemployment rates would imply increasing employment, cp. Household’s income will increase, increasing demand for firms’ goods and services. AD increases, output increases, quantity of goods and services consumed increases. Higher material well being. Increase in SOL.
-High employment will also increase workers’ morale which may in turn increase labour productivity. Higher labour productivity may lead to higher wages as demand for labour would have increased. Higher disposable income amongst households, and therefore higher purchasing power on goods and services. Hence, standards of living would have increased. :)

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

I have forwarded to Yi Hui and Edmund who will forward to the rest of you.

~Zhongye

Question 5
• Expansionary Monetary Policy – Interest rate reduction (Extract 2)
o By theory, the fall in interest rate should work in the US – US has a large multiplier. Furthermore, it is a large economy, hence it is a price-setter in the funds market. Thus, when it reduces interest rate, other countries will follow suit. -> “UK also reduces its interest rates after the US did so.”
o However it may not work, does not solves sectoral unemployment. Monetary policy is generic, does not target at any particular sector.
o Interest inelasticity due to poor business outlook, hence fall in interest rates does not lead to a rise in investment expenditure. MEI curve will be relatively steep.
• US government and Central Bank are not actively combating unemployment – there is an observable improvement in labour productivity (see Question 3)
o The US government wants to continue to encourage technological advancement so that it leads to future potential growth.
o Capital accumulation may continue.
o Labour may undergo skills retraining – quality of labour improves in the long-term.
o Outsourcing – Reduction in cost of production for US. If foreign countries have comparative advantage, they can produce goods at lower opportunity cost, hence reducing the cost of production for the US.

• Evaluation for US’s policy of not doing anything:
o Does not solve unN in the short-term, hence the standard of living of households will continue to be eroded. AD will continue to be suppressed at a low level, and this will lead to lower economic growth. (firms are unwilling to invest due to poor business outlook, hence affecting potential growth.)
o In long-term, if unN had already been persistent for a long period of time, employment may not increase. (eg. A retrenched worker’s skills deteriorates after being unemployed for a period of time)
o Affects children’s education – hence affecting future labour productivity.

• Hence, policy of ‘doing nothing’ is being hindered by the high level of uncertainty involved. -> supply-side policy

• The government may adopt expansionary fiscal policy instead. Government may target spending on R&D in sun-set industries -> increase employment.
 However US may not be advised to carry out expansionary fiscal policy – already in a budget deficit.
 US is the largest debtor in the world.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
sidenote: I will forward to yi hui and edmund. Those who want a hard copy of this plus the marking scheme come and find me.

~zhongye

Dear all,

Problem Set no. 4 for term 2 Due: 4 May (Monday) 12 noon - reps to ensure all is in before slotting into pigeon hole

Case Study Q1 (WB pp 45 - 6): all


Case Study Q2 (WB pp 46 - 8): all


Case Study Q3 (WB pp 48 - 9): all

Essay: Discuss if a devaluation of currencies is the most beneficial policy to tackle the problem of falling exports for countries such as Singapore and China. [15 marks]

Levels Marking Scheme for Case Study Question on whether US adopts the best policies in tackling unemployment

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
L3 Policies that are adopted by US as shown in the extract are explained and evaluated clearly. Fiscal policy is explored as an alternative policy that is not mentioned in the extract.

An answer that comes to a synthesis or stand on whether the best policy is adopted will get a maximum of 8 marks (provided all the above is fulfilled.)

There is a very strong linkage between the policies and the tackling of unemployment rates in the US.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
7 – 8
L2

Answer identifies expansionary monetary policy, explains it and evaluates the effectiveness of such a policy. Answer may also suggest and evaluate the use of fiscal policy to overcome unemployment.

Answer fails to identify Alan Greenspan’s stand on the supply-side measures.

Or answer explains the policies on tackling unemployment but evaluation and linkage to the US context is weak.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

4 - 6
L1

Lop-sided answer that only explains how the policy works.

Or discuss of policies only in theory, without clear attempts to link to the context of the case.

There is little or no attempt to draw resources from the case. 1 - 3

hello all!
i think we should collect separate funds for chem and phy since there are h1 and h2 right
yeap then it will be fair =]

hope that this idea can be carried out
toodles

Dear all,

I will be conducting the

CE for BoP on Saturday morning at 0800h. The reason for this is to allow a focused effort to revise for BoP.

Please consolidate a name list of those who are down for

CCA duties and can't come. State their CCA & start time.

Please give me the list by

tmr after lecture.


LP

CASE STUDY Qn 3 (pg 38) parts and learning points:
(a) - data response skills: cross country comparisons, reading bar charts, interpreting relative data
(b) - using economic analysis to explain conflicting viewpoints and outcomes
(c)(i) - causes of unemployment, indicators of causes
you may choose not to do part (ii)

ESSAY Qn 4a (pg 39)
Main learning point: responding to the stimulus (signpost)

N.B.: All to write out in FULL

Due date: 22 April 2009 (Weds) 12 noon.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

On the side note, Mr Lin have sent me the incomplete supply-side notes that he let us preview. I will send to Yi Hui and Edmund to forward it to the rest. Those who want a hard copy of it inform me.

~Zhongye

must watch!!! =D

Unemployment in the UK and US
Extract 1: Falling unemployment (the Guardian, 2000)
The claimant count in the UK has fallen steadily – it is now 3.6 percent. An alternativemeasure, the labour force survey, however indicated that unemployment rate is 5.3 percent.

But is some parts of the country are enjoying full employment, there are pockets left
untouched by growth. Cities that were thriving on heavy industries such as Liverpool and Glasgow, inner city districts such as Tower Hamlets, parts of the Scottish highlands as well as resorts such as Brighton are pockets of employment black spots.

Age and racial discrimination contribute to the difficulty for some to find jobs. Whiteapplicants are three times more likely to get an interview than people from Asian backgrounds with equivalent qualifications and five times more likely than black people.

Extract 2: Boom, boom…bust: a tale of two economies (the Economist, 2002)
In 2001, for the first time in eight years, the annual change in real GDP of the US
economy was negative. As the domestic economy experienced a downturn, the number of
people out of work has increased. The Federal Reserve reacted to the decline in economic activity by cutting its interest rate to just 2 percent in October 2001, the lowest in forty years. The Monetary Policy Committee of the Bank of England responded by reducing its interest rate to 4 percent although the UK economy was relatively strong compared to that of the US.

Extract 3: No change in US rates (Today, 2004)
Policy-makers sounded more cautious about the prospects for a strong job growth – so far a missing ingredient in the recovery from the recession.

Federal Reserve chairman Alan Greenspan said last week that job picture should brighten “before long as output continues to expand”. One factor presently holding hiring down is a huge growth in labour productivity, but those gains will wane indefinitely and force companies to take on more employees.

Extract 4: Protecting jobs will backfire (Today, 2004)
Alan Greenspan warned that “erecting walls” in a bid to curb job losses would backfire on the US.

Although he firmly believed that employment would begin to increase more quickly
before long as output continued to expand and that new jobs would replace old jobs, he also cautioned that the job turnover process would never be without pain.

He acknowledged the rising concerns “about the possibility that an increasing number of our better-paying white-collar jobs will be lost to outsourcing”. He said, “We can erect walls to foreign trade and even discourage job-displacing innovation. The pace of competition would surely slow and tensions might appear to ease. But only for a short while.” Efforts to protect US jobs through legislation could end up backfiring, he added.



Questions
1. With reference to data, describe how macroeconomic performance of the US and
UK had changed since mid 1990s to the early 2004. [4 marks]

2. Explain what is meant by labour productivity [1 mark]

3. With reference to extract 3, analyse the short and long term impacts of labour
productivity improvement on unemployment in the US [3 marks]

4. Analyse the causes of unemployment in the US and UK between 1996 and 2004
[6 marks]

5. Based on the data, do you agree the US is adopting the best policies to combat
unemployment? [8 marks]

6. How far does table 1 show that standards of living has improved in the US and
UK in the later half of the 1990s? [8 marks]

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Note: I will email the file to edmund and yi hui to send around.

"2008 as a whole, the economy is estimated to have grown by 1.2 percent, compared with 7.7 per cent in 2007 "

a) What factors may have caused the slower economic growth rate in 2008? (12)

b) What are the relative merits and demerits of the policies that may be adopted by Signapore's government to re-stimulate the economic growth rate? {13}