...Discuss how rising oil price might affect the macroeconomic performance of an economy (25 marks) In economies, oil is a highly desired resource that plays a key role in the production of goods and services and in the provision of energy, meaning that even small fluctuations in its price can lead to supply side shocks for nations as well as lower demand for imports as a component of aggregate demand. A supply side shock is a shock that will shift the Aggregate supply curve and in the case of oil will be a negative shock because it will increase costs for an economy, as they are dependent on it. Oil is, for a large number of products and services, fundamental to their production, be it in the manufacturing of the good itself or the energy needed to perform tasks in transportation, heating storage etc This therefore follows that oil is a major cost of production for goods and on a macro level effects Aggregate supply shifting it to the left. In indicated by the shift from AS1 to AS2 in the graph. The magnitude of the shift will be dependent on any stabilisers the economy has in place to dampen the effect of the shock such as fast acting fiscal responses, like reducing the tax on oil but it is undoubtedly true that these will not cushion the shock completely. A shift in, AS will have two important effects: an increase in inflation due to the new raised price level and an increase in unemployment. It could have been argued that in the short run, the economy would hold true...
Words: 1341 - Pages: 6
...Research Proposal on “To study the impact of oil price shocks on the macroeconomic performance of China” Table of Contents Dissertation Title 3 Introduction 3 Rationale of Study: Error! Bookmark not defined. Outline of the Research Project: Error! Bookmark not defined. Research Questions Error! Bookmark not defined. Research Aim and Objectives Error! Bookmark not defined. Significance of the study………………………………………………………………………………………………………………………..11 Research Methodology………………………………………………………………………………………………………………………….15 Research philoshophy…………………………………………………………………………16 Research Design…………………………………………………………………………………………………………………………………18 Data Collection…………………………………………………………………………………………………………………………………..22 Data Analysis…………………………………………………………………………………………………………………………………….28 literature review……………………………………………………………………………………………………………………………………36 References ……………………………………………………………………………………………………………………………………………42 Dissertation Title “To study the impact of oil price shocks on the macroeconomic performance of China” 1. Introduction Higher oil prices might affect the global economy through a variety of channels, including transfer of wealth from oil consumers to oil producers, a rise in the cost of production of goods and services, and impact on inflation, consumer confidence, and financial markets. In a pioneer work, Hamilton (1983) indicated that higher oil prices were responsible for almost all U.S recessions after World War II. Later other researchers extended Hamilton’s...
Words: 10757 - Pages: 44
...A-LEVEL ECONOMICS ECON4/Unit 4: Mark scheme 2140 June 2014 Version 1.0 Final The National and International Economy Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all associates participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students’ responses to questions and that every associate understands and applies it in the same correct way. As preparation for standardisation each associate analyses a number of students’ scripts: alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, associates encounter unusual answers which have not been raised they are required to refer these to the Lead Assessment Writer. It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students’ reactions to a particular paper. Assumptions about future mark schemes on the basis of one year’s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper. Further copies of this Mark Scheme are available from aqa.org.uk Copyright © 2014 AQA and its licensors. All...
Words: 7373 - Pages: 30
...Distinguish between microeconomics and macroeconomics. Explain the factors that drive demand and supply. 2 Describe each of the four different types of market structures in a private enterprise system, and compare the three major types of economic systems. 3 3 Identify and describe the four stages of the business cycle. Explain how productivity, price level changes, and employment levels affect the stability of a nation’s economy. 4 Discuss how monetary policy and fiscal policy are used to manage an economy’s performance. 5 Describe the major global economic challenges of the 21st century. Economic Challenges Facing Contemporary Business Rudyanto Wijaya/iStockphoto Copyright ©2012 John Wiley & Sons, Inc. NASCAR Tries to Restart Its Engine ASCAR is widely known as the most popular spectator sport in the United States. Yet even its most diehard fans are tapping the brakes when it comes to buying tickets to their favorite speedway. Tracks in cities such as Phoenix and Talladega have reported double-digit percent declines in attendance. Just as worrisome is the fact that, instead of watching races at home, fans are changing the channel. Some critics of NASCAR blame a drop in dramatic action and a mandated car chassis design that leaves car models undifferentiated. Others say that the races are just too long and the broadcast commentary is boring. But NASCAR defenders argue that there’s another huge obstacle: the economy. “We knew admissions would be down...
Words: 18694 - Pages: 75
...Options in an economy are limited because the factors of production are limited. We can use economic analysis to understand the consequences of our choices as individuals, organizations, and society as a whole. Here are the main points of the chapter: • Most of modern economics is based on positive analysis, which answers the question “What is?” or “What will be?” Economists contribute to policy debates by conducting positive analyses about the consequences of alternative actions. • Normative analysis answers the question “What ought to be?” • The choices made by individuals, firms, and governments answer three questions: What products do we produce? How do we produce the products? Who consumes the products? • To think like economists, we (a) use assumptions to simplify, (b) use the notion of ceteris paribus to focus on the relationship between two variables, (c) think in marginal terms, and (d) assume that rational people respond to incentives. • We use macroeconomics to understand why economies grow, to understand economic fluctuations, and to make informed business decisions. • We use microeconomics to understand how markets work, to make personal and managerial decisions, and to evaluate the merits of public policies. Learning Objectives 1. 2. 3. 4. 5. List the three key economic questions. Discuss the insights from economics for a real-world problem such as congestion. List the four elements of the economic way of thinking. List three ways to use macroeconomics. List three...
Words: 5328 - Pages: 22
...common method for MNCs is through franchises (Jones, 2005). In line with this, economists have put up theories explaining why businesses expand beyond their national boundaries (Hicks, 2000). My primary objective in this paper, therefore, is to discuss international finance and other macroeconomics policies. To foresee this goal, I will delve into foreign exchange market and operations of multinational corporations (MNCs). Theories Explaining Why Corporations Expand to become Multinationals a). Financial economists have brought forward three key arguments that enumerate why companies expand their operations to global markets. These theories are; the imperfect markets theory, the comparative advantage theory and the product cycle theory (Levi, 2004). i).The Comparative Advantage Theory This theory is among the most important concepts in international trade. It states that economic welfare increases when countries specialize in producing lower opportunity cost goods. It is far from looking the monetary value of producing goods as in the theory of absolute advantage (Bishop, 2004). A comparative advantage arises when a corporation realizes larger sales margins as compared to its competitors just because this company can sell at lower prices in comparison to its competitors. Multinationals have consistently...
Words: 5206 - Pages: 21
...international economic analysis • To compare and contrast the economic indicators of countries • To profile the characteristics of the types of economic systems • To discuss the idea of economic freedom • To profile the idea, drivers, and constraints of economic transition CHAPTER OVERVIEW When companies source, manufacture, and/or market products in foreign countries, they encounter fascinating and often challenging economic environments. Chapter Four first explores the economic environments of countries in which an MNE might want to operate by discussing the importance of economic analysis and identifying the major dimensions of that process. It then compares and contrasts key macroeconomic indicators, such as economic growth, inflation, and the surpluses and deficits reflected in the balance of payments. Finally, it reviews the characteristics of the major types of economic systems, explores the principles of economic freedom, and concludes by examining the idea, the drivers, and the constraints associated with the transition from a centrally-planned to a market-based economy. CHAPTER OUTLINE OPENING CASE: MCDONALD’S AND RUSSIA’S ECONOMIC TRANSITION [See Map 4.1.] This case exemplifies the extraordinary challenges of operating in a transition economy. In fascinating detail it explains how, despite enormous start-up costs and difficulties, McDonald’s has managed to succeed in Russia since finally opening its first Moscow restaurant in 1991. Currently...
Words: 4349 - Pages: 18
...BOFIT Discussion Papers 15 • 2011 John Knight and Wei Wang China's macroeconomic imbalances: Causes and consequences Bank of Finland, BOFIT Institute for Economies in Transition BOFIT Discussion Papers Editor-in-Chief Laura Solanko BOFIT Discussion Papers 15/2011 20.06.2011 John Knight and Wei Wang: China's macroeconomic imbalances: Causes and consequences ISBN 978-952-462-711-5 ISSN 1456-5889 (online) This paper can be downloaded without charge from http://www.bof.fi/bofit. Suomen Pankki Helsinki 2011 BOFIT- Institute for Economies in Transition Bank of Finland BOFIT Discussion Papers 15/ 2011 Contents Abstract ................................................................................................................................ iii Tiivistelmä ........................................................................................................................... iv 1. Introduction ....................................................................................................................... 1 2. China’s macroeconomic imbalances ................................................................................. 2 3. China’s external imbalance ............................................................................................. 14 4. Reviewing the export surplus .......................................................................................... 22 5. The external surplus and foreign exchange reserves .......
Words: 13756 - Pages: 56
...Science of Macroeconomics The whole of science is nothing more than the refinement of everyday thinking. — Albert Einstein 1 O N E 1-1 What Macroeconomists Study Why have some countries experienced rapid growth in incomes over the past century while others stay mired in poverty? Why do some countries have high rates of inflation while others maintain stable prices? Why do all countries experience recessions and depressions—recurrent periods of falling incomes and rising unemployment—and how can government policy reduce the frequency and severity of these episodes? Macroeconomics, the study of the economy as a whole, attempts to answer these and many related questions. To appreciate the importance of macroeconomics, you need only read the newspaper or listen to the news. Every day you can see headlines such as INCOME GROWTH SLOWS, FED MOVES TO COMBAT INFLATION, or STOCKS FALL AMID RECESSION FEARS. Although these macroeconomic events may seem abstract, they touch all of our lives. Business executives forecasting the demand for their products must guess how fast consumers’ incomes will grow. Senior citizens living on fixed incomes wonder how fast prices will rise. Recent college graduates looking for jobs hope that the economy will boom and that firms will be hiring. Because the state of the economy affects everyone, macroeconomic issues play a central role in political debate.Voters are aware of how the economy is doing, and they know that government policy can affect the economy...
Words: 188818 - Pages: 756
...Philippines appear to be performing best. Bangladesh, Egypt, Korea, Nigeria, Turkey and Vietnam form a second group of countries that have performed broadly in line with expectations. Iran, Mexico, Pakistan and Russia have need for improvement. We show the ongoing dramatic BRIC influence in key product markets, with autos and crude oil as examples. Important disclosures appear at the back of this document Thanks to Dominic Wilson, Michael Buchanan, Paulo Leme and Swarnali Ahmed for their valuable comments, and to Alex Kelston for the Growth Environment Scores Jim O’Neill and Anna Stupnytska December 4, 2009 Goldman Sachs Global Economics, Commodities and Strategy Research Global Economics Paper Contents Summary Section 1. Where We Stand on the BRICs and N-11 Section 2. The BRICs and N-11 in the Aftermath of the Crisis 2.1 BRICs and N-11 Global Importance Continues to Rise 3 4 6 6 Higher growth contribution Increasing trade shares Rebalancing current accounts Domestic demand and economic resilience 2.2 BRICs Market Performance in Context 6 8 8 9 10 Deeper falls and sharper bounces in equities Currency performance Powerful new signs in terms of monetary policy 10 11 11 Section 3. Our 2009 GES for the BRICs and N-11 Technology posts significant improvement; macro stability...
Words: 13484 - Pages: 54
...Science of Macroeconomics The whole of science is nothing more than the refinement of everyday thinking. — Albert Einstein 1 O N E 1-1 What Macroeconomists Study Why have some countries experienced rapid growth in incomes over the past century while others stay mired in poverty? Why do some countries have high rates of inflation while others maintain stable prices? Why do all countries experience recessions and depressions—recurrent periods of falling incomes and rising unemployment—and how can government policy reduce the frequency and severity of these episodes? Macroeconomics, the study of the economy as a whole, attempts to answer these and many related questions. To appreciate the importance of macroeconomics, you need only read the newspaper or listen to the news. Every day you can see headlines such as INCOME GROWTH SLOWS, FED MOVES TO COMBAT INFLATION, or STOCKS FALL AMID RECESSION FEARS. Although these macroeconomic events may seem abstract, they touch all of our lives. Business executives forecasting the demand for their products must guess how fast consumers’ incomes will grow. Senior citizens living on fixed incomes wonder how fast prices will rise. Recent college graduates looking for jobs hope that the economy will boom and that firms will be hiring. Because the state of the economy affects everyone, macroeconomic issues play a central role in political debate.Voters are aware of how the economy is doing, and they know that government policy can affect the economy...
Words: 188819 - Pages: 756
...International Business Management Program – Petra Christian University 2012 / 2013 Executive Summary Indonesia is known as one of the developing countries in South East ASEAN. Although Indonesia is still a developing country, it has also known as the largest economy in Southeast Asia and also a member of the G-20 major economies. At World Economic Forum on East Asia, Indonesia president said Indonesia will be in the top ten countries with the strongest economy within the next decade. In fact, nowadays Indonesia proves a very good track record in its economy. Finally, it attracts many countries to build strong relationship with Indonesia. One of the countries that have a strong relationship with Indonesia is United Kingdom. In 2006 Tony Blair, the prime minister at that time, met with Susilo Bambang Yudhoyono (SBY), the president of Indonesia, and agreed upon “the establishment of a regular Indonesia-UK partnership forum”. The first Indonesia-UK forum was held in London on 31 January 2012. This forum results in stronger relationship between two countries as SBY made a state visit to the UK on October 30 to November 3, 2012. In this report, we will discuss the economic behavior of both countries. We will also examine the relationship of both countries’ economic condition. Research for this report included data of both Indonesia and England, such as the currency exchange rate between two countries, balance of payment of each country, interest rate in Indonesia and UK, inflation...
Words: 13721 - Pages: 55
...Background to the Situation of the Egyptian Economy prior to the Global Financial crisis | 10 | Financial Subprime Mortgage Crisis Impacts on Egypt | 13 | The Egyptian Economy & the crisis | 21 | The Conclusion & Solutions | 23 | The References | 27 | The Introduction In the second half of 2008, the world economy went through a serious financial upheaval that sparked off in the United States and spread to Europe and the rest of the world. The negative consequences of this financial crisis had bitten the Egyptian economy in many fields. Egypt’s growth rate witnessed setbacks and may have posted its slowest annual growth in half a decade in 2008–2009 as the global crisis hit revenue from tourism, migrant labor remittances, the Suez Canal, export revenues, and investment. The severity of the crisis and its uncertainties demonstrated the need for urgent action to restore financial stability, lead the economic recovery and secure a sustainable future for the country. This paper therefore critically discusses the current global financial crisis and its impact on Egypt. It presents an overview of the Egyptian economy prior to the crisis, followed by an assessment of the depth and impact of the crisis on sectors of the Egyptian economy. Additionally, the paper highlights the actions taken by the Egyptian government to weather the effects of the crisis and concludes with some policy recommendations for the Egyptian economy to cope with this crisis. Financial Subprime...
Words: 10329 - Pages: 42
...rise in the general price level. For the expansion of the early universe, see Inflation (cosmology). For other uses, see Inflation (disambiguation). Economics 2011 World GDP (PPP) per capita by country 2012 World GDP (PPP) per capita by country Index Outline Category History Types Classification History of economics Economic history (academic study) Schools of economics Microeconomics Macroeconomics Heterodox economics Methodology JEL classification codes Theory Techniques Econometrics Economic growth Economic system Experimental Mathematical Game theory National accounting By application Agricultural Behavioral Business Computational Cultural Demographic Development Ecological Education Environmental Evolutionary Expeditionary Geography Health Industrial organization Information International Labour Law Managerial Monetary / Financial Natural resource Personnel Public / Welfare economics Regional Rural Urban Welfare Lists Economists Publications (journals) Portal icon Business and economics portal v t e In economics, inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.[1] When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.[2][3] A chief measure of price inflation is the inflation...
Words: 8835 - Pages: 36
...THE EXTERNAL AND INTERNAL ENVIRONMENTS If managers in the airline industry are going to run their organizations efficiently, they have to understand the external environment confronting them, anticipate how changes in the environment might affect the profitability of their airlines, and take appropriate actions. These actions might include reducing capacity as demand declines, purchasing more fuel-efficient jets, avoiding price wars with low-cost airlines if possible, and reducing labor costs. At the same time the ability of managers to take such actions is shaped by the airlines’ internal environment. For example, some long-established airlines, such as United, have powerful labor unions that have resisted attempts by managers to cut pay for pilots, flight attendants, and ground staff, or to introduce flexible work practices that boost labor productivity. This constraint has kept costs high and made it more difficult for managers to do what is required to make the airline profitable. The situation confronting managers in the airline industry, while dramatic, is not unique. The work of all managers is affected by two main environments: the external environment and the internal environment. The external environment constitutes everything outside a firm that might affect the ability of the enterprise to attain its goals. The external environment itself can be subdivided into two main components. There is the industry or taskenvironment confronting the organization, which typically...
Words: 6133 - Pages: 25
