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1: Oil prices
| Relevant to: |
| Economics (4th edition), Chapters 2, 7 |
| Essentials of Economics (2nd edition), Chapters 1, 2, 4 |
| Economics for Business (2nd edition), Chapters 4, 5, 12 |
| Oil prices have been rising recently. This has led to increases in petrol prices of about 2p per litre. But why has the price risen and what is the role of OPEC (the Organisation of Oil Exporting Countries) in this? The first article, taken from the Financial Times of 13 March 2002, examines why the increase has occurred. Some background to the OPEC actions is given in the other two articles, which are press releases by OPEC. |
| Questions | |
| 1. | Why did oil prices fall after September 11 2001? |
| 2. | Why are oil prices rising now? |
| 3. | What factors will determine whether OPEC will be successful in sustaining higher oil prices? |
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2: Banks found to be overcharging small business
| Relevant to: |
| Economics (4th edition), Chapters 7, 12 |
| Essentials of Economics (2nd edition), Chapters 4, 6 |
| Economics for Business (2nd edition), Chapters 12, 20 |
| 'Small businesses were granted a multi-million pound windfall on Thursday when the UK government announced plans to force the four largest banks to pay interest on business current accounts or offer free banking.' Thus begins the first article, from the Financial Times of 14 March 2002. Two years previously, the Competition Commission was asked to investigate the supply of banking services to small and medium-sized enterprises. Its report was published on 14 March 2000. The second article gives the summary of the report. |
| Questions | |
| 1. | What evidence is there that the market for banking services to small business lacks effective competition between suppliers? |
| 2. | What specific practices restrict or distort competition between banks? |
| 3. | How would you decide whether banks' profits from small business customers were excessive? |
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3: Takeover of electricity giant Innogy by German company RWE
| Relevant to: |
| Economics (4th edition), Chapter 12 |
| Essentials of Economics (2nd edition), Chapter 6 |
| Economics for Business (2nd edition), Chapters 20, 21 |
| The UK's largest electricity supplier Innogy is being bought by German energy giant RWE in a £3.1 billion takeover. The deal will mean that more than half of the UK's power industry will be owned by foreign companies. Will the effect be to weaken or strengthen competition? The following linked articles explore some of the issues. |
| Questions | |
| 1. | If an electricity company is taken over by a company which already owns a major water company, does this have any implications for competition in either industry? Explain. |
| 2. | Critically examine the following statement, made by RWE's chief executive: "Innogy is a perfect fit for RWE's multi-utility strategy. This transaction will lead to real benefits for both RWE and Innogy's shareholders and customers." |
| 3. | Are there any implications for the UK economy if a large proportion of the electricity, gas and water industries are owned by foreign companies? |
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4: Satellite tracking for congestion charging
| Relevant to: |
| Economics (4th edition), Chapter 12 |
| Essentials of Economics (2nd edition), Chapter 6 |
| Economics for Business (2nd edition), Chapter 21 |
| The government is considering proposals made by its independent Commission for Integrated Transport for road charging. This will involve using "existing Global Positioning System satellites to track vehicles via electronic 'black boxes' fixed to the dashboard of all vehicles". The result could be charges to drivers on the busiest roads of up to 45p per mile. In a separate move, the Mayor of London, Ken Livingstone, has given the go-ahead for charging motorists £5 per day to enter central London. Are these two measures appropriate for dealing with traffic congestion and do they involve any undesirable side-effects? The following linked articles consider the arguments. |
| Questions | |
| 1. | What are the advantages and disadvantages of using electronic road charging via the satellite system? |
| 2. | What are the advantages and disadvantages of using charges to enter city centres? |
| 3. | Which of the two systems is a more efficient means of reducing urban traffic congestion? |
News Item
5: Recovery of US economy in sight
| Relevant to: |
| Economics (4th edition), Chapters 13, 16 |
| Essentials of Economics (2nd edition), Chapters 7, 8 |
| Economics for Business (2nd edition), Chapters 25, 28 |
| "The US economy is 'firming' and is 'close to a turning point' but its recovery will likely be 'moderate', Alan Greenspan, chairman of the Federal Reserve, told congressional lawmakers on Wednesday." The linked articles, taken from the Financial Times of 27 February 2002, consider the evidence given by Alan Greenspan and the factors that are likely to influence the strength and speed of the recovery. |
| Questions | |
| 1. | What factors are influencing the level of consumer spending in the USA? |
| 2. | What weaknesses in the US economy has the aftermath of the September 11 attack exposed? |
| 3. | What role do stocks (inventories) play in determining the timing of recovery? |
News Item
6: The Japanese 'slump'
| Relevant to: |
| Economics (4th edition), Chapters 16, 17, 22 |
| Essentials of Economics (2nd edition), Chapters 8, 10 |
| Economics for Business (2nd edition), Chapters 28, 30 |
| Japan's industrial production has stagnated for the past 12 years. Does this mean that the Japanese economy has experienced a slump, and if so, how does it compare with the Great Depression experienced by many economies around the world in the early 1930s? The linked article from The Economist of 28 February 2002 compares the current situation in Japan with that in the Great Depression. |
| Questions | |
| 1. | In what ways has the Japanese economic performance from 1989 to 2001 been (a) better; (b) worse than that of the USA between 1929 and 1941? |
| 2. | According to the article, have fiscal and monetary policy measures helped or hindered recovery in Japan? |
| 3. | What reforms is the article advocating to help improve Japanese longer-term economic performance? |
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7: How successful has the Labour government's 'New Deal' been?
| Relevant to: |
| Economics (4th edition), Chapter 22 |
| Essentials of Economics (2nd edition), Chapter 10 (section 7) |
| Economics for Business (2nd edition), Chapter 30 |
| "The government's New Deal to get young unemployed people into work has had 'a clear positive effect' both in terms of its impact on the economy and in cutting unemployment, the National Audit Office said". This is the beginning of the first of the two linked articles. It is taken from the Financial Times of 28 February 2002. The other two articles, taken from the Independent and BBC News Online of the same day, take a different tone! |
| Questions | |
| 1. | What is meant by the New Deal? |
| 2. | Why is the fact that unemployment has fallen significantly since the scheme was introduced not necessarily evidence that the scheme has been a success? |
| 3. | What evidence would you require to calculate how many jobs had been created by such a scheme? |
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8: Steel wars
| Relevant to: |
| Economics (4th edition), Chapter 23 |
| Essentials of Economics (2nd edition), Chapter 11 |
| Economics for Business (2nd edition), Chapter 22 |
| President Bush has announced that the US will impose tariffs of up to 30 per cent on imported steel. This would seem to flout WTO rules and retaliation has been promised by the EU. Complaints are being lodged with the WTO by many countries. The first two articles, from BBC News Online and the Guardian of 21 March 2002 look at the announcement by President Bush. The other two articles, from the same sources on the next day, look at the retaliation by the EU. |
| Questions | |
| 1. | If free trade can benefit all countries, what is the benefit to the USA of imposing tariffs in steel? |
| 2. | What is the benefit to the EU of retaliation if this is likely to spark a trade war? |
| 3. | How can game theory (see Economics (4th edition) pages 18488 and 338) help to explain the actions of the USA and EU?. |
News Item
9: James Tobin and the Tobin tax
| Relevant to: |
| Economics (4th edition), Chapter 25 |
| Essentials of Economics (2nd edition), Chapter 12 |
| Economics for Business (2nd edition), Chapter 31 |
| James Tobin, the Nobel prize winning economist, died on March 11. He was at the forefront of economic thinking for half a century and was successful in developing many of Keynes' ideas. The first four articles below pays tribute to Tobin and describe his contribution to economics. In recent years, Tobin's name has been associated with a tax on foreign exchange transactions. Such a tax, it is claimed, would reduce speculation. Although Tobin first proposed this type of tax 30 years ago, it was only in November last year that French National Assembly became the first national legislature to incorporate into law a Tobin tax (of up to 0.1 per cent). This was followed by Belgium this month. Tobin taxes have been advocated by many in the 'anti-globalisation' movement. The other three articles explore the use of such a tax. |
A worldly philosopher (The Economist, 14/3/02)
Death of a controversial economist (BBC News Online, 12/3/02)
Keynesian economist of first rank (Financial Times, 13/3/02)
James Tobin – Autobiography (Nobel Laureates site)
The Tobin Tax (www.tobintax.org.uk)
The Tobin tax in the Parliaments (tobintaxcall.free.fr)
Misplaced hopes in Tobin's tax (Financial Times, 20/3/02)
| Questions | |
| 1. | How would a Tobin tax work to reduce currency speculation and is it feasible? |
| 2. | Could such a tax be used to support fixed exchange rates? |
| 3. | How could such a tax be used to support economic development in developing countries? What problems would arise from attempting to use it for this purpose? |
News Item
10: Capital flight from developing countries and the US current account
deficit
| Relevant to: |
| Economics (4th edition), Chapter 26 |
| Essentials of Economics (2nd edition), Chapter 12 |
| Economics for Business (2nd edition), Chapter 31 |
| The USA is running a massive $392 billion current account deficit. This should be matched by an equal and opposite surplus elsewhere in the world, but this does not show up in official balance of payments records. According to the linked article, taken from Jubilee Plus of 26 February 2002, which quotes a Financial Times article, the US deficit is being funded by capital flight from developing countries. |
| Questions | |
| 1. | What is meant by 'capital flight'? |
| 2. | Why does capital flight occur and what impact does it have on developing countries? |
| 3. | Explain the statement in the article that, "What makes the claims relatively safe for the US also makes them risky for foreign investors." |
News Item
11: It happened in Monterrey
| Relevant to: |
| Economics (4th edition), Chapter 26 |
| Essentials of Economics (2nd edition), Chapters 11, 12 |
| Economics for Business (2nd edition), Chapters 22, 31 |
| Ministers from around the world met at Monterrey, Mexico, from 18 to 22 March to debate the problems of financing development in the poorest countries of the world. The conference was based on the Monterrey Consensus, drawn up in January. The Consensus "outlines a broad range of commitments from developed and developing countries" to reduce poverty. The first link below is to the Consensus itself. The other linked articles consider the issues. The final article is by Kofi Annan, Secretary General of the United Nations. |
| Questions | |
| 1. | What are the main commitments by the rich world to the developing world in the Monterrey Consensus? |
| 2. | Is an increase in aid the most important contribution that the industrialised countries can make to development in poor countries? |
| 3. | Should debt relief be made conditional on developing countries pursuing particular polices, and, if so, what should these policies be? |