Monday, 7 June 2010

The role of supply side policies in improving rates of economic growth

Supply side policies are government attempts to increase productivity and the efficiency of markets and the economy.
First of all, supply side policy can do better infrastructure and transport. This can increase the competitiveness of current industry. Also government spending on education and training can overcome the market failure. Better training schemes would increase labour productivity and increse rates of economic growth.
But also there are some disadvantages of supply-side policies, supply-side policies will take a long time to increase productivity, therefore the effect on economic growth will be limited. Also there is no any guarantee that government spending will actually increase labour productivity.
Supply side policies also try to make markets work more efficiently. For example, the government could try to make labour markets more flexible by reducing power of trades unions and making it easier to hire workers. Supply-side policies can make labour markets more flexible and could encourage new firms to enter the market.
Another supply side policy can reduce tax rates. Lower income tax may encourage people to work overtime and encourage more people to move to UK. However, there is no any guarantee that lower income tax will make people work harder.
Productivity growth is one of the most important factors for influencing long term economic growth. The growth of aggregate supply determines the long run rate of growth.

Wednesday, 17 March 2010

Arguments for and against protectionism of steel industry in the USA.

Protectionism is an economic policy of restraining trade among countries, using methods such as tariffs on imported goods, quotas. Government through using protectionism, try to discourage imports.
Protectionism protect businesses and workers within a country by restricting or regulating trade with foreign countries. According to article about steel industry in the United States, because of high amount of steel imports, many companies bankrupted, more than 50,000 jobs destroyed, so many negative consequences happened, that's why the president of USA, decided to make tariffs on imports of steel products, he wanted to make protectionism system in the United States. The main problem is that people are becoming unemployed and companies lose their workers, so if American government make protectionism system in their country, they can improve quality of their steel market and they will spend less on imports, what is good for their economic system as a whole and it will improve their national production, but on the other hand protectionism can lead to monopoly, therefore it will reduce competition among firms and companies. Also, if USA government reduce the amount of imports, it can help to the current account, probably for United States it is much better to improve their steel industry rather than import steel from other countries, because USA is a country of massive abilities and they can make their own steel industry on a high level, and there is a huge amount of products which made from steel, for example cars, if USA develop their steel industry, it will be cheaper for consumers to buy American cars, because steel made from their own country. Possibly through supply side policy, by training and giving practice to steel manufacture workers, it will also help for country, and in this case protectionism is useful. The main problem of protectionism system is monopoly which can happen, if protectionism will be in USA, because the one steel company can be above all other companies and it will not be competition among countries, therefore it will be a monopoly in USA. Anyway, advantages for protectionism of steel industry in the USA more than disadvantages, through protectionism people will have their jobs and government will not lose a big amount of money on imports of steel from countries of steel industry such as India.

Monday, 1 March 2010

Does economic growth always lead to increase in living standards?

I think that it is really difficult to give a particular answer on this question, because there are some ways in which economic growth leads to increase in living standards of people and there some disadvantages of it.
First of all,if we look on advantages of economic growth for standard of living, we can take an example of increasing in consumption, consumers can benefit from consuming more goods and services, so if consumption levels are high, prosperity will be bigger. Improving in public services, if tax revenues increase, the government can spend more on important public services such as health and education, if the quality of health services improve, the quality of life will improve as well.
Reduced unemployment and poverty. Economic growth helps to reduce unemployment by creating jobs and services and it is very important because unemployment is the main source of social problems such as crime, however in many countries of EU with high economic growth, in countries such as France, Spain or Italy there are still high levels of unemployment and in this case unemployment is not reduced by economic growth. Also there some disadvantages of economic growth, economic can leads to increase in inequality between people,if we look on UK or USA in 1980 and 1970, we can see the result of economic growth is inequality. Economic growth can lead to more hours of work, it means that if incomes are high, it can lead to people working longer hours and it looks that, people are unable to enjoy their higher incomes.
So, I looked at some advantages and disadvantages of economic growth for our living standards and we can see that there is no a particular answer, but I think that,economic growth leads to increase in living standards,because the economic growth can solve the most important problems with education and health or consumption of goods and services and these things are more important than an inequality or longer working hours.

Tuesday, 2 February 2010

Economic aims of conservatives

How we know, in this May, in UK will be new elections of new premier minister. The is a main candidate who is more likely to win,David Cameron. He is a chairman of Conservative party and he is more likely to win against a representative of Liberal party Gordon Brown, because his economic aims look very efficient.
So, here some aims of David Cameron and Conservative party as a whole.
1) Ensure macroeconomic stability, conservatives want to safeguard Britain's credit rating with a credible plan to eliminate a large part of deficit over a Parliament. And consevatives point out that, their fiscal policy will seek possibilities to help to keep interest rates lower for longer. The Bank of England is going to continue to target 2 per cent of CPI (Consumer Price Index) and will use it in new role to preserve financial stability.
2) Create a more balanced economy. How I understood, conservatives want to create better conditions for higher exports,investments and saving as a share of GDP.
3) Conservatives want give jobs for unemployment people and reduce the number of children in workless households.
4) They want to make Britain for business, to improve Britain's international rankings for tax competitiveness and business regulation.
5) Conservatives want to raise productivity growth in the public sector,to deliver better schools and a better NHS.
6) Also, conservatives want ot reduce UK greenhouse gas emissions.

Monday, 18 January 2010


I have read an article about privatization and the reasons of it.
So, first of all, privatization it is a process of transfering ownership of a business or public service from public sector to the private sector. if we look on privatization better, we can understand, that actually can not guarantee the progress in economics,but privatization increase rivalry on a market.
Also I have known some information that, there are three types of privatization: Share issue privatization, Asset sale privatization and Voucher privatization.
Share issue privatization it is a privatization,where selling shares on a stock market
Asset sale privatization it is a privatization where selling entire firm to a strategic investor, usually by auction.
Voucher privatization it is a privatization where sharing of ownership are distributed to all citizens, usually for free or at a very low price.
Actually privatization it is a positive thing for government, because privatization increase rivalry on the market, therefore economic growth will increase,what is good for a country.

Chapter 6, definitions

Fiscal policy-the taxation and spending decisions of a government.

Monetary policy-central bank and/or government decisions on the rate of interest,the money supply and the exchange rate.

Supply-side policies-policies designed to increase aggregate supply by improving the efficiency of labour and product markets.

Relationary:of policy measures designed to increase aggregate demand.

Deflationary: of policy measures designed to reduce aggregate demand.

Discretionary fiscal policy-deliberate changes in government spending and taxation designed to influence aggregate demand.

Automatic stabilisiers-forms of government spending and taxation that change automatically to offset fluctuations in economic activity.

Economic cycle-the tendency for economic activity to fluctuate outside its trend growth rate,moving from a high level of economic activity (boom) to negative economic growth (recession)

Progressive tax-a tax that takes a higher percentage from the income of the rich.

Regressive tax-a tax that takes a greater percentage from the income of the poor.

Recession-a fall in real GDP over a period of six months or more.

Human capital:education,training and experience that a worker,or group of workers,possesses.

Tariff-a tax on imports.
Quota-a limit on imports.

Occupational immobility of labour-difficulty in moving from one type of job to another.

Protectionism-the protection of domestic industries from foreign competiton.

Voluntary export restraint (VER)-a limit placed on imports from a country with the agreement of that country's government.

Tuesday, 12 January 2010

Balance of payments

I am going to tell you about some information about balance of payments. Balance of payments it is a record of money flows coming in and going out of country.
Balance of payments it is a monetary deals between country with another countries of the world. These deals include imports and expports of goods, services or financial transfers. Balance of payments is making deals for a specific periods and they are happening in a single currency, usually the domestic currency for the country concerned. Balance of payments usually is using for imports and exports, for example: if a country is importing is more than exporting, it will be a trade balance deficit.
Int he past, governments emphasised on achieving a satisfactroy balance of payments positions, particularly on trade in goods and services. But nowadays government may not be concerned on the short term of expenditure which exceeds export revenue. And for government is better to see an increase in competitiveness of their producers, because it will maintain aggregate demand and output high in the economy.