Revision Links

Hi there,

   Exams coming, aren’t they? I know some of you guys are feeling extremely relaxed, whereas some are experiencing sleepless nights due to the accumulated amount of stress, tension and anxiety. Luckily, I don’t belong to neither of these groups. To help you with a revision part, I thought that posting links that are helping me with going through the economics syllabus might be a good idea. Dunno, anyway, decided so. Um, yeah, so here they are:

   Tutor2u (click) – one of the most known websites for AS/A2 students, highly recommended.

   Tutor2u Blog (click) - guys from Tutor2u are writing pretty good articles about current events that are more or less linked to the theory part covered in textbooks.

   Economic Student (click) – another site that can come with some good revision bits. Recently created, though already has a lot entries.

   Economics Help (click) – a blog of an A-Level Economics teacher. In his entries he tries to further develop and apply to real world situations knowledge obtained from the textbooks. Easy to understand language, no worries.

   The Student Room [Economics; A-Levels; Economics, Business and Management] (click ; click ; click ) – personally, one of my favourite sites, bookmarked long time ago. Can post questions and queries, and literally few minutes later, an answer can be expected. Good way to improve your writing skills. When I spot a question that I can give a reasonable reply to, no hesitation, scribble few sentences, post the message, wait for other responses and see in which ways can my answer be improved next time. Quality way for economics nerds to spend time.

   Extras:

   Economic theories (click) – a website suggested by Rene. Quite a lot of additional information about economic theories and thoughts. History, biographies, explanations. Recommended reading for those taking AEA Economics in June (23rd June, waaaah! It’s coming!)

   BBC News Economy (click) – fresh and daily updates news concerning round-the-world events. Special sections for the most important ones, e.g. global recession, housing market, budget 2009. Some videos and statistics available, too. Help to keep in touch with the world, especially while being a non-TV-watching person (um, with occasional exceptions for EPL and Champions League matches).

Hope that helps. Happy revision.

Cheers,
John A6

PS Saturday afternoon, FA Semi-final match Arsenal-Chelsea in less than an hour, and you guys know what? I’m not going to watch it. Simple because I’m stuck with psychology revision. Considering it as my hardest subject. What’s even funnier, Psychology is considered to be a soft subject. Or semi-soft. No difference. Heh. And nah, don’t think that was my personal rant or so. Simply a real life example of opportunity cost – um, the cost of the next best alternative forgone, or something like that. So sad the cost forgone must be one of the best matches of this season. Dokey, off for now. Once again, happy revision.

The Return of Depression Economics and the Crisis of 2008 by Paul Krugman

Hi there,

   Long time no writing. Few weeks ago at the Heathrow Airport while waiting for my flight to Poland, well, to say the least, was bit bored, so decided to walk around. After a while spotted a bookshop. ‘Cannot be any worse, can pretend to be a little, nerdy bookworm’ yup, that was my first thought. Immediately found Business section and … um, there was one book that sparked my interest. Want to see the cover?



   Not bad. And the content is even better. Author of the book – Paul Krugman – is a 2008 Nobel Laureate in Economics, so I reckon he has to know a tad about economics. He tries to take a deeper insight look into economic crises that swept across Asia, Russia and Latin America in 1990s. Could we have prevented the financial crisis of 2008? Could the previous happenings have been considered as some sort of warnings? What lessons can be learnt? Answers to these and many other questions can be found in this brilliantly written book. Krugman uses a language that is not packed with loads of jargon and complex economic terminology. Instead, his thoughts are converted into sentences widely understood, as after all, economics is a social science, for people in general, not only economists. Definitely a good read for A-level or Business Foundation student. Currently in the middle of reading, though can already say that it was a worthwhile purchase. £9.99 worth of investment in exchange for lifetime, invaluable knowledge. Not a bad deal. Though, you can make even better one, I found the same book on Amazon for £6.59 + free delivery (click) and as a bonus, you can look into exemplary pages of the book (click). This should eventually convince you to have a read.

Cheers,
John A6

RES Young Economist of the Year 2009

Hi there,

   Just thought you might want to know that Royal Economic Society launched (quite a while ago actually) an economics essay competition with a following topic to write about:

‘Are economic recessions inevitable?’

   Indeed, a very good question. More information to be found on the poster,




Click HERE to download A4 size poster.

   Feel free to ask for any suggestions, corrections and tips from economics teachers at Bellerbys College London. Don’t ask for too much though, it is ought to be more of your work than theirs.

Struggling to start?

   Click HERE for suggestions on how to research for RES competition. Good luck.

Cheers,
John A6

PS If being a 2009 Young Economist of the Year is not enough for you, then may I emphasize what you should have already known from the poster – the main prize is £1,000. And an engraved trophy.

Theories of Money Demand and Supply

   In economics, the Theory of Money Demand stresses on the positive relationship existing between the general prices or the nominal expense rate and the total amount of money.

Historical Evolution of the Theory of Money Demand:

   The Theory of Money Demand is considered the brain-child of the famous Polish astronomer and mathematician, Copernicus. In the hands of the Jean Bodin, the noted economist, the theory progressed immensely in establishing the relation between gold and silver imports and rise in the market prices. In the Quantity Theory of Money, the “Equation of Exchange” which substantiates the relation between the supply of money and the value of cash transaction was first affirmed by David Hume, the well-known philosopher and later expanded by the renowned British political economist, John Stuart Mill. Between 19th and 20th century, other prominent economists like Irving Fisher, Simon Newcomb and Alfred de Foville further developed the theory, offering it the present form.

   There are basically three theories to the demand for money. They are the Classical, Keynesian and the Quantity Theory of Money. Each of them may be discussed under the following heads:

Classical theory of money demand:

   The main concern of this theory is to analyse how money may affect the Aggregate Demand (AD) of goods and services in the economy. According to the Classical Theory the AD is more or less stable . Shifts in the demand and the supply of money cause changes in the AD and the general price level. This theory does not explain the different components of AD.

Keynesian Theory of Money Demand:

   As opposed to the classical theory the Keynesian theory decomposes money demand into Consumption, investment, Government spending and trade balance.

Mathematically,

   AD = C+I+G+(X-M) where C = Consumption of currently produced goods and services

I = Investment

G = Government Spending in the currently produced goods and services

X = Export

I = Import

   According to the Keynesian Theory of the demand for money, the Aggregate demand is highly unstable due to changes in business and consumer expectations. Money does not play a vital role in the determination of the general price level and the Aggregate Demand of the economy.

Quantity Theory Of Money

   The Quantity Theory of Money can be explained by the equation :

MsV = PY

or Ms = (Y/V) *P

Where Ms: Supply of Money

Y : Income Level

V: Velocity of Money

P: Price Level

   This equation implies that keeping the velocity of money and the income level constant, changes in the supply of money would cause changes in the general price level.

   Money Supply Theory in macroeconomics refers to the study of the quantity of money available at the hands of people within the economy to buy goods, services and securities. The interest rate is the value of money over time, that is the price paid for acceding payment of monetary debts. These two are inversely proportional as the supply of money increases the interest rate decreases. The equilibrium at the money market is reached when the quantity of money demanded and supplied becomes equal to the rate of interest.

   Money involves both coins and banknotes, therefore the supply of money in an economy will consist of both the supply of banknotes and coins. Precisely the concept of money supply involves the sum total of all electronic, credit-based bank deposits balance accounts along with the printed-paper notes and minted coins. According to the principle, money is a medium of transaction that is utilized in settling a debt. Money supply can take place in varying measures. The narrowest measure counts only liquid money while the broader measure takes into account the form that deals money as a store of value. The situation of inflation occurs when the supply of money increases to an extreme level.

Role of Central Bank in Supply of Money

   When the Central Bank is ‘easing’ the money supply increases and when it is ‘tightening’ the money supply decreases. In the condition of easing more liquid money is available for the private banks. During the condition of tightening the liquid money is pulled out of the private banking sector. The Central Bank also creates new reserves that let the banks lend out more money. Then through the process of ‘money multiplier’ the loans and bank reserves increase. According to Mises the state of the art monetary policy of money supply expansion runs the risk of undermining the value of currency. Mises endorsed the view of formulating a monetary policy that is different from the state of the art monetary policy. He aspired to minimize the risk of devaluation and create a free society.

   Source: http://www.economywatch.com/economics-theory

What is Quantitative Easing?

* Quantitative easing (QE) is what economists call 'turning on the printing press'.

* Its aim is to get money flowing around an economy when the normal process of cutting interest rates isn't working - most obviously when interest rates are so low that it is impossible to cut them further.

* The central bank does not actually print money, it simply increases the size of banks' accounts at the central bank, known as 'reserves' giving the banks the boost.

* Bank swap their securities such as government debt, mortgage-backed securities or even equities, for these reserves.

* Theoretically the increase in the money balances held by the banks lead to an increase volume of lending.

* Experts differ as to whether policy will work, but say that with interest rates already at one per cent and the economy in recession, the BoE has no other ammunition left.

* The Bank of England's MPC will vote on QE on 12th March and is expected to start the process very soon.

Video: QE explained in 108 seconds - click.

UK Economy Statistics

Thought that posting some statistics about UK to see how it is currently performing would be a decent idea for the first entry. So, off we go.

CPI 2008 - 3.8%

CPI (17th Feb 2009) - 3.0%

Bank of England interest rate (5th Feb 2009) - 1.0%

Unemployment rate 2008 - 5.5%

Unemployment rate - 6.3% (+0.4% in Q4 2008)

GDP 2008 - $2.787 trillion

GDP (PPP) 2008 - $2.279 trillion

GDP real growth rate 2008 - 1.1%

GDP per capita (PPP) 2008 - $37,400

GDP composition by sector 2008 - agriculture: 0.9%

industry: 22.8%

services: 76.2%

Investment (gross fixed) 2008: 16.7% of GDP

Fiscal year - 6th April - 5th April

Budget - revenues: $1.107 trillion

expenditures: $1.242 trillion

Current account balance 2008: -$72.54 billion

Exports 2008 - $468.7 billion

Imports 2008 - $645.7 billion

Think these are the most important ones. Hope you will find them useful. Feel free to leave any comments if anything has sparked your mind while browsing through all these numbers.

Cheers,

John A6

Books

Wishing all Bellerbys students a happy new year!

Apologies for the long hiatus, as the past term has been extremely hectic.

The Bellerbys London Economics Club has enjoyed great success, with participation in our Economics Essay Competition extending to our Oxford and Cambridge counterparts, and we'll be looking forward to more contributions from all our students. Results and winning essays for the past 2 months will be posted on the blog very soon.

As the January exams come to an end, the Economics Club will once again resume its fortnightly visits to various public lectures held in London, and kindly check the blog regularly for updates on them.

To end the post, I will add a couple more book-recommendations:

1. The Strategy of Conflict - Thomas C. Schelling

2. The Return of Depression Economics and the Crisis of 2008 - Paul Krugman

Once again, wishing all a happy new year!

Chik A52