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Subsidies

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Australian Government in 2014 subsidised the mining and exploration of coal by energy companies by $4 billion AUD. European agricultural subsidy (CAP- common agricultural policy, 30bn a year)

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Cyclical unemployment

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Eurozone crisis- 11.5%, due to inability to devalue euro and low AD

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Price floor (Minimum Price)

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Australian min wage - $17.70 per hour (2016) Scottish alcohol price floor 50p per unit

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Price ceiling (maximum price)

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New York (Bronx) price ceiling on rent for housing and apartments- rent control

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Positive Consumption Externality

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Eg. Vaccinations, education Singapore training schemes, 95% subsidized for low wage workers

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Negative Consumption Externality

answer

Consumption of alcohol in India (ie. many car accidents leading to deaths, injuries - making loud noises at late night, Fights) (Led to an alcohol ban in some states) Smoking (second hand smoke) Singapore has a 71% tax on cigarettes

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Positive Production Externality

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Research and development- developing new technologies that benefit society or can be used by society. Bee farming (pollination of multiple species)

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Advertizing/Persuasion to limit Negative Externalities

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Switching to public transport, less smoking, changing to greener companies, decreasing consumption of unhealthy foods (Singapore healthy eating campaign)

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Taxing Negative Externalities

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The Carbon Tax implemented by the Gillard Government in Australia in 2012.

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Cap & Trade Policy

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UN Kyoto Protocol (cutting global greenhouse gas emission) - 1997 (150 countries, US didn't ratify) EU emissions trading system

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Limitation of Carbon Tax

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Harms Economic Growth (US and China refuse)/ international competitiveness, Norway considering scaling back carbon tax due to failing oil sector investment

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Low interest rates

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Japan (-0.1% - April, 2017)

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Unemployment rate

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Hovering around 5-6% in Australia 2016 Swaziland: around 40%

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Monopoly (competitive branding)

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Luxottica (sports eyewear) involved in production of over 80% of eyewear products Apple - 40% of US smartphone market

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Oligopoly

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Singtel, Starhub, M1 Singapore buses (they have identical fares and they haven't changed in decades) US Airline Industry: 5 airlines have over 70% market share of industry

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Monopolistic competition

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(perfect comp except there is room for diversification/branding) Barbers, hairdressers, beauty salons, restaurants

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Limitation of switching to biofuel

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Conflict with food (Brazil uses 25% ethanol in gasoline)

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Failure of Expansionary Fiscal Policy

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Failure of expansionary fiscal policy in Greece. However, it may not always achieve its intended effect. For example, consider the situation of Greece. Any reduction in tax would probably not lead to increased consumer spending, as people would be more inclined to save than spend in a recession. Investment would also be highly doubtful as it requires business confidence, and Greece simply doesn't have that from it's investors. Also, government spending requires the government to have substantial funds - or it would require borrowing money. This could exacerbate an already worsening situation. Etc.

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Formal collusion

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OPEC (Organization of the Petroleum Exporting Countries)

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Informal collusion

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Virgin Airlines and British Airlines fixing fuel surcharges

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Common access goods

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Fishing in international waters (South China Sea)

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Regulatory Barriers

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French Government ordering all Japanese video imports to be inspected in Poitiers - took too long etc. + effectively reduced imports

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VERs (Voluntary export restraint)

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Following the end of the FMA, EU and US asked China to restrict its textile exports.

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Exchange rates

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1 USD = 1.4 SGD

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Current Account Deficit

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Australia has a current account deficit of $15,535 million AUD The U.S. current account deficit was $469 billion in 2016.

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Centrally Planned Economy

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SOVIET RUSSIA (in soviet russia you do not plan your economy, your economy plans you)

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Structural unemployment

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The manufacturing industry, for example, has been in significant decline in Australia over the last few years. As Car manufacturers such as Ford, Toyota, Holden and Mitsubishi have stopped manufacturing in Australia, this means that manufacturing skills are less demanded whilst other jobs requiring different skills are more demanded. This means that structural unemployment increases for those previously in manufacturing jobs. Detroit dude... how did you miss that

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Privatizations (making government businesses private)

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Telstra, Qantas, Commonwealth bank, Public Transport

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Nationalisations (making private businesses government owned)

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1946- The Bank of England was nationalised

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Mergers/acquisitions

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Tiger Airways was bought by Singapore airlines in 2016

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Stagflation (increase in inflation and increase in unemployment simultaneously)

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1973- US oil crisis. The 1973 oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries proclaimed an oil embargo (ban on trade). By the end of the embargo in March 1974, the price of oil had risen from US$3 per barrel to nearly $12 globally; US prices were significantly higher. The embargo caused an oil crisis, or "shock", with many short- and long-term effects on global politics and the global economy. However, this spike in oil prices meant that wages could not keep up, and people lost their jobs as there was very little supply and demand of oil because of the spike in price.

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Supply side policies- Labour market reforms

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Minimum wage- In december 2015, the state of Kentucky lowered the minimum wage from $10.10 to $7.25 USD in order to reduce unemployent.

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Supply side policies- trade liberalization

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September 2009- The Obama administration will put steep import duties of 35% in the first year on Chinese passenger and light truck tires, responding to what the U.S. International Trade Commission determined to be a surge of Chinese tire exports that has rocked the domestic U.S. tire industry and displaced thousands of jobs

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Supply-side Policies - Investments in Human and Physical Capital

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Australia increased spending on education with a 37% real increase in spending over years 2003 to 2013. - 2008 Financial Crisis, the Obama Administration increased its spending on public projects such as road building in an effort to boost aggregate spending

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Expansionary fiscal policy

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September 2014- South Korea's government will boost budget spending more than previously planned at least for the next three years to help the local economy better cope with a tepid global recovery and a continued slump in domestic demand. South Korea increased fiscal spending by 5.7% in the following year.

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expansionary monetary policy

answer

following the uncertainty of Brexit, the UK lowered its interest rates to a record low of 0.25%

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Cash Rate

answer

Australia- 1.5% 2016 Japan- 0% 2016

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Specific Tax

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Cigarettes have a specific tax of approximately $14 per pack in Australia

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Inflation rate

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1.3% in Australia 2016 -0.5% in Japan 2016

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Contractionary fiscal policy

answer

Iceland in 2012 cutting spending and reduced their deficit

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Marginal Propensity to Consume (MPC)

answer

Some wealthy nations, such as Japan and Germany, have relatively low marginal propensities to consume. Likewise, many poor African and Asian countries have relatively high marginal propensities to consume.

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Contractionary Monetary Policy

answer

Chile became the third Andean nation in just over a month to raise interest rates as a slump in local currencies pushed up inflation across the region. The central bank indicated further increases will follow. 2015 - October Singaporean bank interest rates rising in response to the US 2016 Austerity measures in the EU post 2008 recession

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Perfect Competition

answer

Shanghai Watermelon market in October pretty much all agriculture (wheat, rice, etc) Night markets in Thailand/Cambodia

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Asymmetric Information

answer

VW Diesels - VW cheated on emissions tests - Consumers believed that the VW diesel cars were more environmentally friendly than they actually were - Demand (MPB) with asymmetric information was greater than it would have been if buyers had correct information - More VW Diesels were bought and sold at a higher price than what was socially optimal

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Cost push inflation

answer

OPEC increasing prices of oil thus increasing costs of production Increase of minimum wages in Washington to $15

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Demand pull inflation

answer

increasing household income increases AD (China)

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Automatic stabilizers

answer

unemployment benefits, welfare payments (transfer payments)

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Progressive taxation

answer

French citizens whose income is over 1 million euros will be taxed at a rate of 75%.

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Growth with inflation

answer

In 2013, India experienced economic growth at 7.5% but inflation at 12%

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