Global economics examples Flashcards
What is the central bank in the Eurozone?
ECB
How many countries are in the Eurozone?
19
How much was the Eurozone bailout to Greece>
€289bn
Evidence for unemployment varying throughout the Eurozone
1) Greece = 18%
2) Denmark = 5%
Evidence for national debt varying throughout the Eurozone
1) Greecce = 182%
20 Germany = 61%
What was the Exchange Rate Mechanism (ERM)?
A semi-fixed exchange rate regime whereby currency were pegged against the German mark and could fluctuate from it by 6%
Why did the UK join the ERM in 1990?
1) By the end of the 1980s inflation was at 6.9% despite a base rate of 15%, which conflicted with the Conservative’s target of zero-inflation by the end of the century
2) ERM would deliver low inflation because it would force the UK to become more efficient rather than relying on depreciating the £
How did the ERM affect the UK economy?
1) £6bn was wasted trying to keep the £ in line with the DM
2) Interest rate was 10% in September 1992 in order to preserve the value of the £ despite unemployment of 10% and a recession taking place
When did the UK leave the ERM and what effect did this have?
1) 16th September 1992 (‘Black Wednesday’)
2) £ depreciated by 20%
How much has the single currency in the Eurozone increased trade between EU members?
5-15%
What are the trends in the UK’s BoP?
1) Runs a consistent deficit in goods but surplus in services (but surplus not big enough to offset deficit)
2) Primary income has moved into deficit as their is an increased ownership of UK assets by foreigners
What is the UK’s BoP?
Look up closer to exam time
What percentage of UK income is generated from services?
80%
Why is the UK particularly susceptible to economic growth causing current account deficits?
Has a high MPM because no comparative advantage in the production of manufactured goods
Examples of the UK using supply side policies to improve competitiveness
1) Infrastructure investment to improve transport and communication (e.g. 5G, Crossrail, HS2)
2) Cutting corporation tax and offering tax breaks (e.g. Enterprise Investment Scheme and the Venture Capital Trusts offer tax relief for individuals interested in investing in UK small businesses)
What is the current rate of corporation tax in the UK?
19%
Who are the UK’s top 5 trading partners and % of exports that go to them?
1) US (13.4%)
2) Germany (9.6%)
3) Netherlands (6.8%)
4) France (6.5%)
5) Ireland (5.8%)
Examples of the implementation of the Washington Consensus
1) Support of free trade through WTO and NAFTA
2) IMF bailouts on the condition of free market reforms
3) Developing economies focusing on the primary industry as that is where they have comparative advantage
Examples of failure of policies inspired by Washington Consensus
1) Macro-economic crisis of Latin America in the 1980s
2) South East Asian crisis in the 1990s
Example of protectionist policies helping the development of LICs
The Brazilian government’s suport and development of Embraer (an aerospace conglomerate) helped Brazil become successful in airline manufacturing
How has the Chinese approach undermined the Washington Consensus?
1) Chinese firms have invested substantial sums in 125 countries, to the value of $190bn
2) Pay off from investment in infrastructure has shown that an interventionist approach can have a bigger return that leaving it to the free market
Example of the failure of privatisation
The privatisation of Bolivia’s water industry in the 1990s, under pressure form the World Bank, has led to water supplies being cut off from the poorest members of society
