Cambridge International AS and A Level Economics
SELF-ASSESSMENT TASK 2 Read the feature below and answer the questions that follow.
Recovery under threat January 2014 saw a significant fall in share prices on stock markets throughout the world. The fall was particularly significant in the United States of America. The downturn in global share prices combined with a decline in China’s economic growth rate led some economists to worry that the recovery from the 2007– 2008 recession was under threat. The US economy had been driving the global recovery but in January 2014 there were some economists who thought that the country’s economic performance in 2014 would not be as strong as its 2013 performance. There was some evidence to support this view. Manufacturing and car sales declined at the end of 2013 and start of 2014. Economic activity was disrupted by bad weather at this time with very low temperatures and heavy snowfall. There were some economists, however, who were more optimistic about future US economic performance. Although consumer confidence had been low in 2013 it
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1 Which two countries does the article suggest currently have the greatest influence on the world economy? 2 What do you think is meant by bad weather disrupting ‘economic activity’? 3 Can you name three stock markets?
was expected to rise in 2014, which it was thought would contribute to a higher economic growth rate in 2014 than in the previous year. In contrast, there was widespread agreement that China’s 2014 economic growth rate would be lower than its 2013 rate. How much China’s output increases has a significant impact on a number of other economies, including emerging economies such as Brazil, India and Turkey. In 2013 the Turkish central bank more than doubled the country’s interest rates. The European Central Bank and the Central Bank of Japan were, however, seeking to introduce expansionary monetary policy measures, in part to increase the confidence of households and firms in the future economic prospects of their economies. A rise in optimism about the future could itself contribute to a better economic performance, with higher consumer expenditure and investment increasing output which, in turn, would increase incomes.
5 Does the article suggest that expectations influence economic behaviour? Explain your answer. 6 Note down three economic terms from the article you do not currently understand. Using this book and the glossary in the student CD, check on their meaning.
4 Explain the effect a rise in interest rates may have on the construction industry.
The economist’s toolkit
Data skills
The economist has a varied toolkit, a term that can be used to describe the skills and techniques available for the analysis of economic problems. Two skills that are of particular relevance when studying the Cambridge syllabus are:
Five main skills are required for the Cambridge syllabus. These skills are:
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the ability to interpret and use data the ability to write in a clear and effective way.
Note: you may find it helpful to refer back to this section of the book intermittently when you are undertaking some of the self-assessment tasks. You should also refer back to this section before you take any examinations.
1 the ability to pick out the main features in a data set 2 how to calculate a simple average and know what it means 3 a knowledge of trends and the rate of change in a set of time-series data 4 a working knowledge of index numbers 5 how to interpret economic information produced in visual form.
In addition, you will find it useful to know how and why economists make forecasts.