IMF
The International Monetary Fund is an IGO (Inter-Governmental Organisation) that loans money out to countries in financial instability. It loans money out with 'strings' attached where countries must agree to implement certain policies or meet the terms and conditions in order to receive the loan. Recent interference by the IMF include negotiating bail out packages for the Greece and Ireland. The IMF have also in the past given loans to developing countries such as Uganda, in order to help them develop. There are 187 member nations in the IMF, the most powerful member being the USA - with the highest voting power.
Monday, 29 August 2011
Sunday, 28 August 2011
Word of the Day
OFT
The Office for Fair Trading uses market structure, conduct and performance indicators to scan the UK economy for evidence of monopoly abuse. This is used to analyse and evaluate costs/benefits of monopoly. The OFT, along with the Competition Commission, creates incentives for firms to resist temptation to exploit possible monopoly power. Firms will not want to risk getting caught by these regulatory bodies therefore uses these incentives.
The Office for Fair Trading uses market structure, conduct and performance indicators to scan the UK economy for evidence of monopoly abuse. This is used to analyse and evaluate costs/benefits of monopoly. The OFT, along with the Competition Commission, creates incentives for firms to resist temptation to exploit possible monopoly power. Firms will not want to risk getting caught by these regulatory bodies therefore uses these incentives.
Saturday, 27 August 2011
Word of the Day
Trade Union
A collective association of workers whose aim is to improve the pay of workers and improve the conditions of work for its members. Some of the things they work to improve include:
A collective association of workers whose aim is to improve the pay of workers and improve the conditions of work for its members. Some of the things they work to improve include:
- Real incomes
- Pensions
- Security
- Unfair dismissal
- Counter monopsony power that firms hold over workers (see Word of the Day)
- Protect against discrimination
- Collective bargaining: negotiate pay levels above the current levels that exist. This is only effective if the union has control over the entire labour supply available in the industry.
- Closed shop agreements: Employers and unions agree that all workers be part of the union. This is now illegal in the UK because it encourages labour restrictive practices. Two types, pre-entry and post-entry. Pre-entry is when workers must join the union before starting employment. Post-entry is when workers not part of a union start employment, but have to join a trade union to keep the job.
- This is to prevent free-riders benefiting from the mark-up wages bought about by trade unions.
Friday, 26 August 2011
Keynes vs Hayek (free market)
The greatest economic debate has been between the Keynesian views about government intervention in the economy and the Hayek views that markets should be left alone.
These two videos put some fun into the fact that these opposing views will always battle it out to be the best option. In your exam, it is important to form your own opinion about the economic issues you are discussing.
http://econstories.tv/2010/06/22/fear-the-boom-and-bust/
http://econstories.tv/2011/04/28/fight-of-the-century-music-video/
So which are you?
These two videos put some fun into the fact that these opposing views will always battle it out to be the best option. In your exam, it is important to form your own opinion about the economic issues you are discussing.
http://econstories.tv/2010/06/22/fear-the-boom-and-bust/
http://econstories.tv/2011/04/28/fight-of-the-century-music-video/
So which are you?
Word of the Day
Monopsony
A type of market structure where there is only ONE buyer and many sellers. An example of pure monopsony is a firm that is the only buyer of labour in an isolated town. Such a firm is able to pay lower wages than it would under competition. Although cases of pure monopsony are rare, monopsonistic elements are found wherever there are many sellers and few buyers. Monopsonies, like monopolies and oligopolies, are a form of imperfect competition.
A type of market structure where there is only ONE buyer and many sellers. An example of pure monopsony is a firm that is the only buyer of labour in an isolated town. Such a firm is able to pay lower wages than it would under competition. Although cases of pure monopsony are rare, monopsonistic elements are found wherever there are many sellers and few buyers. Monopsonies, like monopolies and oligopolies, are a form of imperfect competition.
Thursday, 25 August 2011
Fall in Consumer Confidence
Consumer confidence continued to fall last month amid increased uncertainty around the UK
Nationwide said its Consumer Confidence Index was 49, well below its average reading of 79. In June, the reading was 51.
Economists are predicting that the rest of 2011 will see no considerable improvement in consumer confidence. This may lead to even greater falls in stock markets around the world and could lead the world back into recession. Falling consumer/business confidence is the last thing we need to achieve periods of economic growth in the coming years. The LRAS curve may shift leftward if AD and (SR)AS shift leftward too.
The Government’s plan to freeze public sector pay for now and other private sector firms simply not rising wages in line with inflation (known as fiscal drag) means that the cost of living is rising, severely affecting consumer confidence.
Major purchases of big-ticket items are the hardest hit, Nationwide said, and consumers also continue to expect a fall in house prices over the next six months. This means the value of people’s assets are falling, and consumers will feel ‘poorer’ furthering the fall in consumer confidence.
Nationwide said its Consumer Confidence Index was 49, well below its average reading of 79. In June, the reading was 51.
Economists are predicting that the rest of 2011 will see no considerable improvement in consumer confidence. This may lead to even greater falls in stock markets around the world and could lead the world back into recession. Falling consumer/business confidence is the last thing we need to achieve periods of economic growth in the coming years. The LRAS curve may shift leftward if AD and (SR)AS shift leftward too.
The Government’s plan to freeze public sector pay for now and other private sector firms simply not rising wages in line with inflation (known as fiscal drag) means that the cost of living is rising, severely affecting consumer confidence.
Major purchases of big-ticket items are the hardest hit, Nationwide said, and consumers also continue to expect a fall in house prices over the next six months. This means the value of people’s assets are falling, and consumers will feel ‘poorer’ furthering the fall in consumer confidence.
Word of the Day
Backwards Bending Supply Curve
When the wage rate is W1, the number of hours worked is L1. If wages rise to W2, the number of hours worked rises to L2. This is due to something called the substitution effect. The substitution effect relates to the fact that leisure becomes more expensive compared to the other goods that money from wages can buy (for example, the worker can now start buying food from the Asda ‘Extra Special’ range rather than ‘smart price’ products). Workers prefer to work over leisure time. The worker responds to the rise in hourly wage rates by substituting more labour over leisure time.
After wages rise to W3, labour – the number of hours worked – falls to L3. This is because of the income effect. The income effect relates to the fact that a worker can achieve a target income without working so many hours and therefore prefers more leisure time once this target income level has been reached. A worker chooses to work fewer hours to enjoy more leisure time because leisure time is a normal good, rather than an inferior good. This means that as real incomes rise, demand for leisure time – the normal good – rises as well.
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