Discretionary Fiscal Policy

Using fiscal policy in response to economic conditions, e.g. a recession, to induce changes in the economy. Some economists say that discretionary fiscal policy can be a good way to reduce the volatility of business cycles. For example if economic growth is slowing and forecasters predict that a down turn/recession may occur by the next year, expansionary fiscal policy may be used to reduce the impact. However, forecasters' predictions do not always come true, thus giving the case against using discretionary. Also, effects of fiscal policy do not show immediately due to the time lag, thus there is danger of in fact worsening the economic situation than improving it.

Evidence of Price War

Following 16th October's post giving you an oligopoly case study, forecasters have predicted that over the Christmas period Tesco lost market share while Asda, Sainsbury's and Morrisons grew market share. This just shows how price wars can adversely affect companies within a market. The 'Big Price Drop' campaign was matched by Asda's '10% cheaper' and others from the competitors. However a counter-argument is that the price led to increased market share for all the major firms regardless that Tesco has lost.

Latest figures

A good website to use to find out the latest growth, inflation, interest, exchange and unemployment rates is http://tradingeconomics.com/. You can spend a while looking at the most recent data and pick out patterns and make comparisons.

Interesting facts to note and use:

Japan's interest rate is 0%

The Euro area has the highest unemployment rate

China's inflation rate is 4.2% while India's is over 9%!

Ireland has the highest budget deficit, 31.30% of GDP. Greece, the USA, UK, Portugal and Spain follow soon after.

India's GDP was 6.9% in the third quarter of 2011, compare that to China's 2.3%

Channel 4: Unemployment Video

This video, http://www.youtube.com/watch?feature=player_embedded&v=dWn6rjEXpSk, provides a good case study about unemployment in the UK and highlights the inequality between the North and South. Sorry if it is slightly outdated, but there are still some very useful points you can pick out.

The World Tonight 5/1/12

From 21:50 listen to The World Tonight to find out more about Brazil's economy, report by Justin Rowlatt.  For those who also do A Level geography, type 'Justin Rowlatt bbc' into Google to watch his previous BBC documentaries. Key points:

Growth has been falling from an average of 7% per year to 3.5% now

Brazil's economic growth has been fueled by China's demand for Brazil's beef, soya and raw materials

The world's second largest soya producer, first coffee, sugar cane, orange juice and beef producer.

Brazil's relationship with China

Growth in 2012

This chart here shows the predictions for growth worldwide along with the reasons for it. Read it to learn more case study examples and improve your knowledge of the world economy, ready for 2012!

Top 10 Posts This Year

Today is a very special day, not just because it is New Year's Eve eve, but because it is the blog's five month anniversary with my first post being on purchasing power parity! Below I have compiled a list of the top 10 posts so far. If these are popular, I am assuming they have been most helpful to you guys, so please have a look at all 10, and good luck with your revision.

10. Trade Unions posted on 16th November

9. Oligopoly Case Study  posted on 16th October. Although it was a few months ago, the case study can still be used as an example.

8. Word of the Day: Economic Growth on a PPF posted on 3rd August

7. Notes on Supply Side Economics and Crowding Out posted on 16th October

6. Word of the Day: Backward Bending Supply Curve  posted on 25th August

5. Negative Externalities posted on 16th September

4. Monopoly posted on 23rd August

3. Word of the Day: Elasticity posted on 13th August

2. Perfect Competition Long Run Equilibrium posted on 11th August

1. Perfect Competition Short Run Equilibrium posted on 10th August

It seems perfect competition is the most popular, not surprising because even I had difficulties with this one.

Keep looking out for more revision notes to come soon!