Economics 9708/41 — October/November 2020
Cambridge A-Level · A Level Data Response and Essays · worked solutions for every part, with the mark scheme
Topics Macroeconomic Objectives and Policy Conflicts · Short-Run and Long-Run Production · Balance of Payments and Policies to Correct Disequilibrium · Efficiency and Market Failure · Externalities, Social Costs and Benefits · Government Policies to Correct Market Failure · +12 more
Divergences in economic performance
A report considered the determinants of long-term economic growth and rated economies on their global competitiveness using an index from 7 to 1. Labour productivity is one influence on the competitiveness of an economy and labour productivity also determines the level of prosperity that a country can achieve. Switzerland, Singapore and the United States (US) were the world’s three most competitive economies (see Table 1.1). Countries in the Euro Area were also ranked in the report. The Euro Area is a monetary union of 19 countries that have adopted the euro as their common currency.
Table 1.1 Data related to global competitiveness of selected countries, 2016–17
| Country | Global competitiveness rank | Global competitiveness index | Labour productivity GDP per hour (US$) | Current account balance (US$bn) | Current account balance (% GDP) |
|---|---|---|---|---|---|
| Switzerland | 1 | 5.81 | 64.2 | +66.1 | +9.4 |
| Singapore | 2 | 5.72 | 41.6 (2013) | +63.0 | +21.5 |
| US | 3 | 5.70 | 68.3 | -476.6 | -2.6 |
| Euro Area: | |||||
| Netherlands | 4 | 5.57 | 65.4 | +59.7 | +8.5 |
| Germany | 5 | 5.57 | 65.5 | +296.2 | +8.8 |
| Belgium | 17 | 5.25 | 69.7 | +4.8 | +0.7 |
| Spain | 32 | 4.68 | 51.0 | +23.5 | +1.6 |
| Italy | 44 | 4.50 | 51.9 | +47.8 | +2.4 |
| Greece | 86 | 4.00 | 35.3 | -0.2 | -0.2 |
In the Euro Area a strong economy such as Germany has benefited much more from the use of the euro single currency than weaker economies such as Spain and Greece. As these weaker economies do not have their own currencies, they have been forced to adjust their domestic economic policies to tackle balance of payments problems by decreasing wages and reducing government spending instead of devaluation.
The unemployment rate in the weaker economies of the Euro Area remains higher than in the stronger economies. For example, in Spain it was 18.4% in 2016 with 40% of young people out of work. By contrast the unemployment rate in Germany was 3.9%, an all-time low in 2016. Although unemployment across countries in the entire Euro Area decreased from 2013 to 2016, prices have shown a strong upward trend in 2016 which may result in reduced consumer spending. In future this may cause increases in interest rates in an attempt to control inflation.
Sources: The Times, 1 February 2017; World Economic Forum Global Competitiveness Report, 2016; http://time.com
Explain what is meant by labour productivity and whether the information confirms that countries with higher labour productivity are always more competitive than countries with lower labour productivity.
State three general macroeconomic aims a government might have.
Is there evidence in the information that suggests Germany is achieving any of these macroeconomic aims?
The article describes the effects of a single euro currency on the changes in the domestic policies of Spain and Greece.
Discuss the possible effects on the Spanish and Greek economies that these policy changes might have.
The rest of this paper
6 more questions- Q2Efficiency and Market Failure · Externalities, Social Costs and Benefits · Government Policies to Correct Market Failure25M
- Q3Utility Theory · Indifference Curves and Budget Lines25M
- Q4Market Structures · Performance of Firms in Different Market Structures · Objectives and Pricing Policies of Firms · Growth and Survival of Firms · Costs of Production25M
- Q5Demand for and Supply of Labour · Wage Determination and Labour Market Intervention25M
- Q6Money and Banking · Macroeconomic Objectives and Policy Conflicts25M
- Q7Employment and Unemployment · Effectiveness of Macroeconomic Policies25M