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

what about there productivity doesnt that effect unit labour costs ?

That aswell, yes - but I've not got any hard data to show that productivity has fallen under the PIIGS. I think it'd be fair to assume that productivity has generally risen, however just because productivity increases doesn't mean unit labour costs decrease.

It could be, and in the context of the PIIGS I think is most likely, that wages have risen at a faster rate than productivity, which means that there's an increase in unit labour costs.

this might sound like a stupid question, but as a plus point for a single currency i have that it 'eliminates exchange rate risks and other uncertainties'

What are these risks and uncertainties?

this might sound like a stupid question, but as a plus point for a single currency i have that it 'eliminates exchange rate risks and other uncertainties'

What are these risks and uncertainties?

so there average wages rose due to the inflation they had and this alongside not much productivity lead to a increase in unit labour costs?

There's price transparency, countries know who is being more efficient at making let's say laptops as everything is in euro, so if a member country decided to import laptops it wouldn't have to worry about which is cheaper, as if they didn't operate under a single currency and their were ER were volatile one importing from one country might be the cheaper choice one day and might not be anymore the next

thanks. so is it like when the buyers and sellers know the pricing. Also could this then be linked to lemons theory or would that not apply?

need help asasp

Comment on the effectiveness of government cutting taxes as a fiscal stimulus to avoide or reduce the effects of a recession

Comment to the extent to which generous welfare systems are a cause of unemployment

comment on the difficulties of the ECB setting interest rates that are optimal for any one country inside the MU

Comment on the extent to which a reduction in trade barriers in manufacturing and agricultural goods can help a developing country

need help asasp

Comment on the effectiveness of government cutting taxes as a fiscal stimulus to avoide or reduce the effects of a recession

Comment to the extent to which generous welfare systems are a cause of unemployment

comment on the difficulties of the ECB setting interest rates that are optimal for any one country inside the MU

Comment on the extent to which a reduction in trade barriers in manufacturing and agricultural goods can help a developing country

thanks. so is it like when the buyers and sellers know the pricing. Also could this then be linked to lemons theory or would that not apply?

sorry i dont know if i made that clear enough, lemons theory in the sense that there is perfect information among member countries in pricing etc so they importers would have a better idea of valuation?

Comment to the extent to which generous welfare systems are a cause of unemployment

for that one i put

yes- incentives to work go down so unemployment could be a cause of that

no - its infact spains competiveness which is why they are in unemployment

no- market failure so people are getting qualifications but there are no jobs for them

possible due to a economy not having flexable labour markets to account for changes in demand

perhaps a negative multipler effect such as what spain had would lead to unemployment not goverments.

Lower trade barriers in manufacturing and agricultural goods = lower price for foreign countries to import their goods = increase of the demand for their currency = increase in exports = higher AD = lower unemployment rate = increased gov revenue which might be spent on education and training which will enable the future workforce to have the appropriate skills in order for the economy to still be developing ... multiplier effect

However
- May not have enough spare capacity to benefit from lower trade barriers, so investment is needed, but investors may be reluctant to invest on a developing country for agriculture when they could invest on something more profitable
- Usually developing economies have huge amount of debts, so the developing economy will not benefit from the higher gov revenue as a majority of it will be used to pay back the debts
- at the same time developed countries will export technological products which are worth much more than agricultural, therefore the terms of trade increases, so the developing economies won't benefit from trade as much as the developed ones

Conclusion
Trade liberalistaion on its own is not a guarantee of human development as other factors must be taken in account such as literacy rate

Hope this helps
If anyone has other points to add to this please do

does a over reliance on developing countries on argiculture goods production bad, as this will mean they will never have better health care or education as income from agriculture is not high?

General question:
Would Greece's debt get written off if they left the EU, like they couldn't be forced to pay it?

Do a lot of imports in to an economy affect local industries ?

No
In fact, Greece would have to devalue their currency by a lot to gain competitiveness. A devaluation of their currency would actually increase the size of their debt.