Fixed exchange rates
Continue on with the booklet you were given to address the objectives for fixed and managed exchange rates, and comparing floating vs fixed.
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Use https://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm and p 265-266 to meet this objective... i.e. make notes on what they are trying to do and how they are doing it
Once again we are briefly moving sideways into another Development Economics topic. Here are the objectives:
With reference to a specific developing economy, and using appropriate diagrams where relevant, examine how the following factors contribute to economic development. 1. Education and health 2. The use of appropriate technology 3. Access to credit and micro-credit 4. The empowerment of women 5. Income distribution Part A - use resource A Choose either Afghanistan or Congo and explain how two or more of the poverty traps depicted in the handout apply to them. Explain how other institutional, political, social and cultural factors may create obstacles to development – use examples in your explanation. One problem is inadequate infrastructure - use Kognity to explain ways in which infrastructure contributes to growth and development. Part B · Education and health - use Resource A and p356-8 of textbook o The opposite of a vicious cycle is a virtuous cycle, i.e. one with favourable results. Create virtuous cycles depicting the benefits of improved education and improved health. o What specific things could be done to improve these two areas. o Use Nepal as an example of correlation between education/health and income levels. · The use of appropriate technology - use p364-5 of textbook o What does this mean in terms of both production and consumption? · Access to credit and micro-credit - use resource A and p362-3 of textbook o What is credit? o Why is a sound banking system essential for economic growth and development? o Create a poverty cycle using LOW SAVINGS as both a beginning and finishing point. o What specific difficulties exist for the poor in developing countries with regards to obtaining credit? o What is micro-credit and how does this help development? o Case-study – Grameen Bank, Kiva (case study/questions - Resource B) · Empowerment of women o Use Resource C to give examples of gender inequality and the deprivations faced by women and girls in much of the world. o What benefits may a country expect if women become more empowered? Resource C and p365 of textbook o What strategies could be implemented to ensure improved social and economic participation of woman? · Income distribution - p365-6 of textbook o How can high levels of income inequality hinder growth and development? Is inequality growing? In a magical land inhabited by long lashed, multi-colored Alpacas who love lollipops, rainbows and friendship, there's a yawning divide in wealth distribution ... what's behind the inequality gap? Click here to find out. The role of taxation and other measures in promoting equity
The relationship between equity and efficiency
These objectives are covered in the booklet you started in the last class.... continue!
Causes of inflation (D/B p230-232)
The cure will depend on the cause:
Governments throughout the world are faced with the problem of unemployment. Consider the following newspaper headlines: · Unemployment benefits cut · Government introduces new training schemes for the long-term unemployed · Incentives for young people to stay at school · Minimum wage to be abolished · Government to reduce taxes/charges on business · Government to introduce work-for-the-dole scheme (i.e. recipients of unemployment benefits would have to do some type of work in the community to receive their benefits) · Government announces massive public works program (e.g. provision of employment by the creation of predominantly public goods at a prescribed wage) · Job subsidies to be paid to businesses who provide 12 months work for the long-term unemployed · Government to lower interest rates For each headline: a) Explain how the strategy may affect unemployment, including what type of unemployment will be influenced. b) Examine the effect of each strategy on the level of government spending (in some cases there will be no effect). Conclusions: What specific measures can be used to target the five types of unemployment? How could these policies conflict with the governments other macroeconomic goals? IB Essay practice a) Explain the various costs of unemployment. b) Evaluate the various policies aimed at reducing unemployment. Types and causes of unemployment
Work to complete: Frictional and seasonal unemployment are fairly short term forms of unemployment. Distinguish between the two and explain the causes of each. Structural unemployment is of greater concern than frictional and seasonal unemployment
The sum of frictional, seasonal and structural unemployment is the “natural rate of unemployment”, i.e. the inevitable level of unemployment which exists at YFE (the full employment level of output or potential output)… there will always be labour market imperfections, e.g. lack of information (imperfect knowledge) or labour market rigidities. Any unemployment which exists beyond this natural rate of unemployment has been caused by the business cycle, e.g. the economy is experiencing a recessionary gap (not at long-run equilibrium) a. Describe cyclical unemployment. b. Use diagrams to explain what causes cyclical unemployment.
Tasks:
How good are you at determining fiscal policy... https://fiscalship.org/index.php"The Fiscal Ship challenges you to put the federal budget on a sustainable course. Measured as a share of gross domestic product, the federal debt is higher than at any time since the end of World War II and projected to climb to unprecedented levels. America is looking at a permanent, growing mismatch between revenues and spending, and policymakers are faced with difficult decisions about how to reconcile important government priorities—including retirement and health benefits promised to the growing number of old folks—with the tax revenues that the current tax code will yield. Today’s tax code won’t yield enough revenue to pay for basic services of government plus the retirement and health benefits promised to the growing number of old folks. So your mission is to pick from a menu of tax and spending options to reduce the debt from projected levels over the next 25 years. Small changes to spending and taxes won’t suffice. The choices are difficult, but the goal is achievable. But budget decisions aren’t only about fiscal sustainability. They also shape the kind of country we live in. To win the game, you need to find a combination of policies that match your values and priorities AND set the budget on a sustainable course." Alternative views of aggregate supply - this is where there is controversy...
Once again you will be working from the Aggregate Supply packet to address the objectives above. The AD curve
Aggregate demand is the total spending in an economy consisting of consumption, investment, government expenditure and net exports, i.e. the total quantity of output (Real GDP) that all buyers in an economy want to buy at different possible price levels (Average Price Level). You will be given some worksheets to do to address the objectives above, one of them linked to the video below: |
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March 2021
Maree SpraggonTeacher of IB Economics at the American School of Budapest Categories |