Question spotting for F585 Economics The Global Economy OCR A level June 2011

So, to take Greece as an example, over a period of 10 years its nominal GDP varies by 1.7%

Also Slovakia, from peak to trough was only 8.1% and yet after adjusting for inflation, in one quarter alone it varies by 0.6 + 8.1% = 8.7% (after inflation) and presumably before inflation a larger amount?

viksta, ill pay your £10000000 if you do the exam thursday, and write my name, canidate number and the other number i cant even think of cause my brain is fried!

arguably before the recession EU track record was not that bad it did control inflation and manged to be a strong currency im not saying its good i think its worth considering, economy's like Greece had bad policy and governments spending too much , and perhaps it was the fault of the private sector such as banks which lead to the creation of PIIGS which had a bigger influence than bad EU policy making?

Hey guys, I'm just wondering here... on a handout my teacher gave me, it listed one of the disadvantages to a monetary union was 'deflationary bias' i.e. in order to establish the new currency as a strong one, the central bank will keep interest rates high in order to have low and stable inflation and encourage countries to purchase it for reserves etc. ...The disadvantage being that certain countries may struggle under such high rates of interest and aggregate demand will be relatively low.

However I'm pretty sure the stimulus package was on about monetary policy being too 'loose' for the PIIGS, and infact real rates of interest were negative... which is why there was so much FDI in the peripheral countries like Ireland etc.

Would I include 'deflationary bias' as a point in one of the cons of the eurozone, or only to monetary unions in general? (If the question was about 'monetary unions' rather than the eurozone specifically.

huh?

nominal GDP is a better way of comparing GDP between economies, but REAL GDP is better for understanding the standards of living within an economy

for example, if nominal GDP rose by 2% but inflation was 5% then REAL GDP would have contracted, so people would be 'worse off'...however this takes away the fact that the economy actually grew by 2%

I think the reason they've left it as nominal GDP in the table is because the inflation rate varies from country to country according to their AD/AS position and fiscal policy, so it wouldn't really be 'fair' to compare REAL GDP

arguably yes, in reality though not really, inflation was stable but consistenly above the 2% target set by the ECB, and due to it being a asymmetric target it lacked the flexibility

Furthermore, economies like greece simply hid there fiscal deficits, in actual fact they've been breaking the Growth and Stability Pact before they even joined the EU, upon joining they gained greater access to finance, were irresponsible and just invested racking up debts that totally 150% of their GDP when the GSP only allows 60%...the GSP went kaput, other countries though hey ho, if Greece broke it so can we, so now you've got the PIIGS all with debts amounting to near their GDP amounts

The reason the the Euro was strong was because of the high nominal interest rate set by the ECB, this high interest rate meant inflation was stable and the value grew stronger...however the hidden debt became more expensive to finance and countries became less competitive with rising costs. Exchange rates sky rocketed, imports became more expensive, the PIIGS became even more uncompetitive and BAM! Eurozone Finance Crisis 2008 goes down in history and gets a page on wikipedia

hi sorry, this doesn't answer your question, but how does loose monetary policy an attraction for FDI? thanks...i

Oh and by the way, can anybody run me through purchasing power parity? I'm finding it hard to find a simple definition online or in my textbook... and my teacher said he can't really describe it to us... lol.

Oh and by the way, can anybody run me through purchasing power parity? I'm finding it hard to find a simple definition online or in my textbook... and my teacher said he can't really describe it to us... lol.

Hey! 'Loose' monetary policy means expansionary monetary policy... or in simple terms.. interest rates are low. Because interest rates are effectively the 'cost of borrowing', many foreigners will wish to invest in a country where the cost of borrowing is low. For some of the countries, real rates of interest were actually negative, where in effect you're 'earning money' for investing, because the rate of inflation is higher than the interest rate.

Hello

Can someone help find the benefits of Spain's generous welfare system please .
Apart from high Consumption, I cannot find anything! :s

they operated a loose monetary policy because of deflation in CPI in 2009, they wanted to reach their target of 2%

Purchasing power parity - what a unit of currency can buy in terms of goods and services

It measures how much the currency is actually worth, how much the currency can buy in the economy. So for example you can buy much more with 10 yen in china than 10 pounds in england.

good standard of living?

good standard of living?