Saturday, 25 January 2014

DD209 Running The Economy : Week 15

Week 15

25 Jan
  •  Week 15: Using an economic simulator

    Motivation to read last week's chapter evaporated, so it remains on the todo the list.

    This week has been more about preparing for the TMA. I have made notes against the extract and am  ready to start writing. I have also started Q2 by posting on the forum but interaction so far is somewhat limited. I think it will be a case of doing what is required of Q2 and then bailing out.

Sunday, 19 January 2014

DD209 Running The Economy : Part 3 - When Inflation Matters (Ch7, Ch8 and online)

This has been a really odd section of the course.

The OU website and study planner has played its part in adding to the general confusion of what to study when. The week numbers bare no relation to the chapter numbers, and given that there have been 2 weeks holiday break plus one week of study completely online, it meant that yesterday at the tutorial everybody, including the tutor, had problems referring back to specific points in previous weeks study, and I wasn't the only person to have studied bits out of order, not that that is a problem in itself.

So far then in summary the chapters have covered,

Chapter 7:
  • Supply side reacts to increased demand when there is spare capacity, and when labour and capital are being wasted.
  •  Fiscal and monetary policy is demand side economics.
  • Inflation, deflation, zero inflation
  • Inflation erodes what nominal wages can buy, and what GDP represents, they both need to grow to counter inflation erosion. Wages need appropriate increase 
  • Nominal wages : actual wages earned, Real wages : purchasing power.
  • Real Wage = nominal wage W / price level P
  • Pi(inflation) = PiL(lagged inflation) + alpha[importance usually =1] (Y – Ye) [output – output at equilibrium or output gap]
  • Phillips Curve and Vertical Phillips Curve

Chapter 8:

  • Demand shock, supply shock (I found it difficult sometimes to tell the difference between the two, but Demand Shock changes aggregate demand, and therefore inflation, which supply shock changes prices,and therefore causes inflation but without changing aggregate demand)
  • Dangers of deflation - real value of debt increase
  • Real interest rate, R = I – pi [where i = nominal rate which can fall to zero, pi = inflation or deflation]
  • Base rate is nominal rate of interest (i), but what matters is real rate of interest (r), rate of inflation (pi), r = i – pi
  • Transmission Mechanism
  • The MR curve is the line showing policy makers chosen path of adjustment to the target rate of inflation.
  • IS Curve : Interest Rate to Aggregate Demand
  • Phillips Curve : demand pressure to inflation
  • Inflation only stable with no output gap.
  • Supply shock, could be an inflation shock due to an increase in fuel tax.
  • Steeper the MR Curve, gentle inflation aversion, Flatter MR Curve, strong inflation aversion.
  • MR curve allows gradual adjustments to target inflation by allowing output/interest rates to return gradually to target after the initial output gap has been created.
  • BoE is an independent central bank.
  • Credibility, Independence,  Transparency
  • Conflicts of targets ?
  • 100 % Credibility can return inflation vertically down the VPC  without creating output gap and unemployment.
  • Inflation bias and time inconsistency
  • Full employment no longer a target
  • Credibility, decide what to do and keep doing it. – consistency brings credibility.
Online week 12 – Describing Economic Data
  • understand the different ways of defining measures of ‘averages’, also called measures of central tendency – mean and median - skews
  • be able to describe and interpret data in terms of its variability, in particular using measures of dispersion – Standard Deviation and Coefficient of Variation
  • familiarise yourself with two ways of presenting data – the frequency table and the frequency chart or histogram
  • consolidate your understanding of inflation targeting and these data techniques through applying them to data about inflation in a range of countries
  • be able to use Dataplotter to help you to analyse data.
  • Questions
                                i.            Is median higher or lower than the mean and by how much and why.
                              ii.            Is standard deviation high or low, is coefficient of variation high or low, are the both high or low if not why not.

Chapter 9 and Chapter 10 to go and then its on to the TMA.

Saturday, 18 January 2014

DD209 Running The Economy : Week 14

Week 14

18 Jan
  •  Week 14: Running the economy in the long run 

    Third tutorial today. We didn't seem to discuss anything earth shattering, but it was fun and I might have picked up a couple of tips which may be of use in the iCMA.

    The week that was completely online covering averages (mean and median), standard deviation and coefficient of diversity was at least pretty straight forward and didn't cause too many problems.

    Just one chapter to go now and it's getting close to the TMA so if I don't want it to be a rush, I really need to at least read the question and start thinking about the TMA answer, even if I haven't completed all the book chapters yet.

Monday, 13 January 2014

DD209 Running The Economy : Finally caught up with the reading.... fact I think I am slightly ahead of schedule. I suppose that is the upside of 2 long and very boring flights, there was very little entertainment choice, and my not having my iPad or any other reading material in the cabin with me my choices were limited, so the book was slightly more interesting that looking out the window, at least some of the time.

There seems to be an awful lot of repetition in this section considering we are just expanding our models to include the IS curve, Phillips Curve and MR curve (the Aggregate Demand curve seems a think of the past now). 

The case study was interesting and it certainly opened up the reasons for Qualitative and Quantitative easing, and I think that section is going to take some more reading to fully understand it.

I have been told that the delay on the first iCMA was to ensure it met the requirements of the course and the next iCMA should be returned more promptly, hopefully within 2 working days. 

I also suspect that not everyone gets the same questions to make it more difficult for people to work together on these things, other online tests I have done have chosen random questions from a larger pool so there is no way of knowing if anybody has the same questions that you do.

Saturday, 4 January 2014

DD209 Running The Economy : Week 12

Week 12

4 Jan

Study break is over, so its back to the books, the website, the iCMA and eventually the TMA.

Only a week behind now, as it was impossible to study while catering (literally) to the needs of a house full of family spanning 4 generations. On the plus side the chapter I have done on this section was straightforward enough, so I'm hoping that the rest of this section is much the same.

After three good marks, I'm feeling pretty motivated about this course, so the pressure is on the keep the marks up and take proper revision notes to make it easy to study for the exam.