Category Archives: Exam revision

Questions for Oxbridge economics applicants

Following on from Roberta Keys blog post on Tutor2u here are some questions that I have used for practice Oxbridge interviews for those candidates hoping to read economics at either Oxford or Cambridge. They might be of interest.

• Does the current crisis warrant a reappraisal of economics as broad as the one that followed the Great Depression?

• Paul Krugman said – “The economics profession went astray because economists as a group mistook beauty clad in impressive looking mathematics for truth” Does he have a point here?

• In the aftermath of the financial crisis do you see an end to the Neo-Classical theory and the Washington consensus and a return to the Keynesian Bretton Woods System?

• Is economics becoming too mathematical?

• In the response to the crisis we have seen more of the same – massive Keynesian stimulus in the form of both monetary and fiscal policy. What are your thoughts on this comment?

• Politicians and some economists said that the global economic growth from 2003 – 2007 was different from previous growth periods in history and therefore shouldn’t be alarmist. Do you agree?

• How could economists prevented a crisis like the GFC in 2008?

• How does politics impact on decision-making for economists?

• How has politics fed the belief that markets left to themselves deliver better economic outcomes?

• Can economists be trusted to draw the right conclusions and learn the right lessons from the financial crisis?

• Since the GFC there has been significant mention of the policies of economists Frederick von Hayek and John Maynard Keynes – who, if any, was right?

• You state that you have read Jeffrey Sachs’ book “Common Wealth” – what policies did he advocate to reduce poverty. (Refers to a personal statement)

• In the book “Dead Aid” you mention “Dambisa Moyo’s criticism of shock therapy in developing countries. Can you say the same in developed nations? (Refers to a personal statement)

• Macroeconomics is essentially ideological – do you agree?

• Keynes said “If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!” What did he mean?

• In a recession, should governments reduce budget deficits or increase them?

• Do zero-interest rates stimulate economic recovery or suppress it?

• Should welfare benefits be maintained or cut in response to high unemployment?

AS & A2 – NZ and Global Updates

NZ World Economy Oct 2014It is important that you are aware of current issues to do with the New Zealand and the World Economy. Examiners always like students to relate current issues to the economic theory as it gives a good impression of being well read in the subject. Only use these indicators if it is applicable to the question.

Indicators that you might want to mention are below. Notice how low global interest rates are as economic conditions have warranted greater borrowing and spending in the world economy.

The New Zealand Economy
Annual economic growth may have peaked, with NZIER Consensus Forecasts expecting economic growth of 3.3 percent for the year ended March 2015 (although the Reserve Bank has the economy expanding by 3.6 percent). Fonterra will be watching international dairy auction results closely, as their latest payout forecast is based upon a lift in dairy prices from current levels. Survey results are consistent with further employment growth, albeit at a more moderate pace. The Reserve Bank is expected to keep the official cash rate on hold for the remainder of 2014 (at least), while further intervention in the foreign exchange market is a possibility.

The Global Economy
The world is now expected to grow by only 3.3pc in 2014 and 3.8pc in 2015, say the IMF. Falling prices have continued to act on a drag on growth in advanced economies.

The IMF thinks inflation remains “too low” and the threat of outright deflation – or negative prices – should continue to concern policy-makers.

One of the reasons inflation has failed to take off, despite growth in many parts of the advanced world, is due to the existence of an ‘output gap’ in a number countries.

This is the term economists use to describe the level of spare capacity in an economy, or the difference between current and potential growth.

A negative output gap indicates an economy is running below potential and has a way to go before growth begins to generate inflationary pressures, forcing interest rate hikes. The United States has the largest negative output gap in the developing world of around 3.5pc of potential GDP

AS & A2 – NZ and Global Updates

NZ Global updateIt is important that you are aware of current issues to do with the New Zealand and the World Economy. Examiners always like students to relate current issues to the economic theory as it gives a good impression of being well read in the subject. Only use these indicators if it is applicable to the question.

Indicators that you might want to mention are below. Notice how low global interest rates are as economic conditions have warranted greater borrowing and spending in the world economy.

The New Zealand Economy
New Zealand’s GDP expanded by 0.2 percent in the June quarter. The result was consistent with consensus forecasts, although some forecasters were expecting a decline in economic activity (due to the flow-on effects of the drought experienced earlier in the year). On an annual average basis the economy expanded by 2.7 percent over the year to the June quarter. The current account deficit totaled $9,099 million in the year ended 30 June 2013, equivalent to 4.3 percent of gross domestic product. Strong economic growth has been forecast for the second half of 2013 as the economy recovers from the drought conditions experienced earlier in the year. The annual rate of inflation is forecast to rise from its current low level back within the Reserve Bank’s medium term inflation target band of 1 – 3 percent over the coming year. The Bank is expected to commence tightening monetary policy (increase interest rates) next year as a result.

The Global Economy
The global economy continues to at very low levels. However most of the economies of the European Union remain in recession (two consecutive quarters of negative GDP). US growth has increased to 2.5% which indicates that the job market is now picking up and demand is more prevalent. Even considering the recent issue with the debt ceiling the US dollar (what is seen as the world reserve currency) has remained relatively stable – in fact it strengthened after agreement was made in Congress.

However the major emerging markets face slower growth and will take longer to come out of the downward cycle. Meanwhile, global financial markets have faced considerable volatility, owing to prospective changes in US monetary policy, a new policy in Japan, and instability in China’s banking system.