Mar 04 2013

## Lesson Plan: Sources of Economic Growth and Development

Introduction: In order to understand the goals of economic development, it is useful to examine the characteristics of more economically developed countries and compare them to those of less economically developed countries. Before beginning the assignment below, watch the following TED Talk by Swedish Professor of world health Hans Rosling:

Resources: Use the following websites to find the required data for the assignment below.

Part 1 – Development Data:

Using the two websites above, locate the following for TWO COUNTRIES, one from the list of countries with “high human development” and one from the list of countries with “low human development”. Use the tables below to fill in the data for the two countries you have chosen.

Social Indicators (find and record figures for both the countries you chose below)

• HDI ranking and value
• Age structure
• Population growth rate
• School life expectancy
• Life expectancy at birth
• Total fertility rate
• Education expenditures

Economic Indicators:

Part 2 – Dependency Ratio:

A nation’s dependency ratio tells us something about the ability of members of a nation’s workforce to provide necessities to him or herself and his or her dependents. Typically, less economically developed nations will have a higher dependency ratio than more economically developed countries. The lower a nation’s dependency ratio, the greater capacity for its workers to accumulate savings, which leads to investment, accumulation of capital, greater productivity, higher incomes and more economic development.

Calculation the dependency ratio: To calculate a nation’s dependency ratio, you must find demographic information on its population. You may need to do additional research beyond the two websites above to find this data.

Calculate the dependency ratios for:

• Country with high HDI
• Country with low HDI

Part 3 – Lorenz Curve and Gini coefficient:

The Lorenz curve is a graphical representation of the income distribution of a country. It plots the percentage of a nation’s total income (GDP) against its total population. The “line of absolute equality” is the 45 degree line, indicating a nation where each quintile (20% of the population) earns exactly the same income as each other quintile. No country is absolutely equal, therefore the line of equality is only used for comparison.

The Gini coefficient is the ratio of the area below the line of equality and above a country’s Lorenz curve and the total area of the triangle below the line of equality. A country with perfect income equality would have a Gini coefficient of 0. A country in which the top 1% had controlled all of a nation’s income would have a Gini coefficient of nearly 1.
Example: Australia’s income is distributed across its population in the following way:

• 1st 20% – 5.9%
• 2nd 20% – 12%
• 3rd 20% – 17.2%
• 4th 20% – 23.6%
• 5th 20% – 41.3%
• Gini coefficient = 0.352

Illustrating your countries’ Lorenz Curves: This is another activity that may require research beyond the websites provided above. Try to find data on the share of national income earned by various levels of society. If you cannot find data for the 20% ranges, use the percentage ranges you can find. Draw a Lorenz curve for the two countries you researched.

Part 4 – Conclusions:

Evaluate your findings from the two countries you researched.

1. What conclusions can you draw about the correlation between GDP, HDI, income equality, social and economic indicators between developed and developing countries?
2. Does a high HDI correlate with relative income equality? What about low HDI?
3. Is a high GDP indicative of high levels of human development?
4. What other conclusions can you draw about economic development, national income, and equality?
5. To what extent did your country with low HD exhibit the following characteristics?
• Low standards of living?
• Low incomes?
• Inequality?
• Poor health?
• Low levels of productivity?
• High rates of population growth and dependency burdens?
• High levels of unemployment?
• Dependence on agricultural production and primary product exports?
• Imperfect markets?

Feb 21 2013

## Degrees of Economic Integration – IB student research project

Using chapter 24 in the textbook Pearson Baccalaureate’s Economics for the IB Diploma, you and your group are to prepare a short Google Presentation outlining the characteristics of, examples of and effectiveness of one of the types of trading blocs that countries may form to promote trade.

Instructions:

2. While the first person is creating the Presentation, the rest of the group should start reading (as a group) the section of chapter 24 on your assigned trading bloc.
3. Once the group has read the correct section, begin working on #1 below. Summarize in large font the main characteristics of your assigned topic. Try to do this in no more than two slides.

Once your Google Presentation is finished (it should be between 4 and 8 slides), go to “File: Publish to the Web…”, select “start publishing” then copy the link to your presentation. In a comment on this post, include your group’s assigned topic, group member names, and the link to your presentation.

You have one period to complete this assignment. If it is not done by the end of class, please complete your presentation for homework and make sure the link is posted in the comment section before your next class!

Group 1: Preferential trade agreements (PTA)

1. Define and identify the characteristics
2. Research and summarize the history of a Preferential trade agreement: Latin American Integration Association (LAIA)
3. Based on what you’ve learned, evaluate the effectiveness of a PTA at promoting the benefits of free trade  discussed earlier in this course (must read pages 517-520)

Group 2: Free trade agreement (FTA)

1. Define and identify the characteristics
2. Research and summarize the history of a free trade agreement: South Asian Free Trade Area
3. Based on what you’ve learned, evaluate the effectiveness of an FTA at promoting the benefits of free trade  discussed earlier in this course (must read pages 517-520)

Group 3: Customs Union and Common Market

1. Define and identify the characteristics. Distinguish between a customs union and a common market.
2. Research and summarize the history of a customs union/common market: Southern Common Market (MERCOSUR)
3. Based on what you’ve learned, evaluate the effectiveness of custom unions and common markets at promoting the benefits of free trade  discussed earlier in this course (must read pages 517-520)

Group 4: Monetary unions and complete economic integration

1. Define and identify the characteristics. Distinguish between a monetary union and complete economic integration.
2. Research and summarize the history of a monetary union: The Eurozone
3. Based on what you’ve learned, evaluate the effectiveness of monetary unions and complete economic integration at promoting the benefits of free trade discussed earlier in this course (must read pages 517-520)

Share your findings: Once each group has put together a short Google Presentation with their findings, we will get into four new groups for the last part of class (one representative from each of the above groups represented) and share our presentations.

Feb 07 2013

## Lesson plan: Elasticity, exchange rates and the balance of payments – understanding the Marshall Lerner Condition

Related Unit: IB Economics Unit 4.7 – Balance of Payments (Unit 3.3 in the new IB Economics syllabus)

Topic: The Marshall Lerner Condition and the J-Curve

Learning Goals/Objectives:

• For students to understand that the levels of price elasticity of demand for a country’s imports and exports determines whether a depreciation or devaluation of the country’s currency will move the nation’s balance of payments towards a surplus or a deficit.
• For students to understand the impact of time on the effect of a depreciation or devaluation of a nation’s currency on its balance of payments in the current account.
• For students to evaluate the argument that a country will always benefit from a weaker currency.

Test of prior knowledge:

1. Define ‘price elasticity of demand’ and explain how it is measured.
2. With the use of examples, explain why some products have low price elasticity while others have a high elasticity. With the use of examples, explain why the price elasticity of demand for some goods changes over time
3. Explain how the depreciation of a country’s exchange rate might affect its current account balance. IS THIS ALWAYS THE CASE?
4. How might the PED for exports and imports influence the balance on the current account following a change in the value of a nation’s currency?

Part 1:

The exchange rate of Japanese Yen in the United States over the last two years:

Take a snapshot of your two-year exchange rate diagram in OneNote, then copy and paste the questions below into the page.

1. Write a brief description of the changes in your country’s exchange rate over the last two years. (2 marks)
2. Focus on two specific time periods from during the last two years: One in which your currency appreciated noticeably and one in which it depreciated noticeably. These could be periods of just a couple of days or longer periods of weeks or more. Highlight these in two different covers in your graph.
3. Describe what is happening to your currency during the two time periods you highlighted in your chart. (2 marks)
4. Explain TWO factors that may have caused the currency to change in value. (2 marks)
5. Given the changes to the exchange rate you identified above, what would you predict would happen to your country’s current account balance over the two periods identified? Explain. Following appreciation – in the short-run and in the long-runFollowing depreciation – in the short-run and in the long-run. (4 marks)
6. Why does the price elasticity of demand for imports and exports increase over time following a change in a country’s exchange rate? (2 marks)
7. Draw a J-Curve showing the likely change in your nation’s current account balance following the period of depreciation of its currency shown in your chart above and explain its shape, referring to your country’s currency. (2 marks)
8. For both the period of appreciation and the period of depreciation you identified above, explain the impact of the change in exchange rates on the following (4 marks)
• a firm that imports its raw materials from the other country
• a firm that exports its finished products to the other country
• consumers who buy imports from the other country
• a firm that produces good for the domestic market and competes with firms from the other country

Part 2:

Read the following article:  . Based on the extracts below, answer the questions that follow.

Some applaud the dollar’s fall because they believe it makes U.S. exports less expensive and that higher demand will cut the trade deficit. The downside of a low-value dollar is that it makes all the imports we consume more expensive, including raw material and parts used by U.S. businesses, and makes it costlier for U.S. dollar holders to travel or invest outside the U.S. A continued drop in the dollar’s value could destabilize the international economy, leading to a worldwide recession.

• Why might the weaker dollar worsen the US trade deficit? Under what conditions would the weaker dollar improve America’s trade deficit? (2 marks)

Some argue our large trade deficit (or current account deficit) is responsible for the fall in the dollar’s value. They have it backward. It is the flow of foreign investment dollars (the capital account) into the U.S. economy that drives the trade deficit.

• How does a large financial (capital) account surplus allow the United States to maintain a large current account deficit? (2 marks)

The world now is actually on a two-currency standard — the dollar and the euro. China in effect has fixed its currency to the dollar for the last two decades, and the Japanese central bank only allows the yen to fluctuate within a limited range against the dollar.

• How do exchange rate controls by China and Japan reduce the likelihood that a weaker dollar will improve the United States’ current account balance? (2 marks)

So long as the U.S. continues to offer a higher return on capital than its foreign competitors, both foreign banks’ and private investors’ demand for dollars grow, and the current account deficit can be sustained.

• If investments in the United States began earning lower returns relative to investments in other countries’ financial and capital markets, what would ultimately happen to the US balance of payments in its current and financial accounts? Explain (2 marks)

The above lesson was inspired by the Biz-Ed activity “International Trade: The Falling Dollar or Rising Pound?”

Nov 21 2012

## IB Economics Podcast Assignment – Market Failure Commentary

As IB SL and HL students, you will be required to write, record and post one podcast written and performed by you and a classmate. The purpose of this project will be to strengthen and enhance your ability to explain economic theory, apply it to current real-world issues and evaluate the effectiveness of economic theory to explain what is occurring.As these skills are required to write a successful IB Economic Internal Assessment, the process of producing the podcasts will strengthen the performance of students on their IAs.

Before reading the rest of the assignment details, listen to the three podcasts below. The first is an introduction to the IB Internal Assessment and this podcast assignment from Mr. Hauet. The second is an example of the type of analysis you may do in an IB Economics podcast from me. The third is a podcast by a Digital Journalism student in which she investigates the negative externalities of the meat industry.

The Assignment:

Students will work in pairs and sign up to produce a podcast on a real world market failure.

For example, you may choose to do your story on an industry you are aware of that creates water pollution:

• Research the industry and find examples how it creates water pollution.
• Investigate the external costs imposed by this industry on the environment and human health.
• Gather data from studies that have already been conducted on industry’s contributions to water pollution.
• Interview individuals or find others’ written or audio/visual accounts of the social, environmental, or health impacts of water pollution.
• Investigate solutions to water pollution that have been implemented in different communities or nations.
• Propose solutions to the specific examples of water pollution you have investigated.

Any audio editing program may be used to produce your podcast. You may find the following recommendations useful:

Podcast Requirements:
Part 1 – Introduction
• An intro accompanied by music – the intro should be a hook such as a section from an interview or a clip from a news program. The music should not be copyrighted and therefore must be taken from sites such as Jamendo or produced by yourself (Garage Band is great for this)
• An brief  introduction to the topic of the podcast
• A fact, economic indicator or story that happened recently that may interest your listeners.This is your “hook”.
Part 2 – Analysis
• Summarize the issue. This should include the cause of the market failure, what it means for the economy, the environment, society or human health, and what is being done about it.
• Application – How can economic theory inform our understanding of the market failure you have chosen to research.
• Analysis– Does economic theory support the findings from your research and what is said in the interview? Why or why not? In a written commentary, diagrams would be a crucial part of analysis. Since this is audio, you can describe the concepts that the diagram you could use illustrate.
• Interview – The podcast must include at least one interview with someone who can provide additional insight into the market you have chosen to research. You may interview someone yourself, or you may use an excerpt from an interview you found in your research (perhaps on YouTube).

Part 3 – Evaluation

• Evaluation – What are the short and long run implications of the market failure on society, the environment or human health. What are the possible solutions to your market failure? How are different stakeholders effected? Is one solution better than another and why?
• Conclusions – Bring the podcast to a close by discussing the implications of the issue in other areas. Can this issue be fixed and if so what are the future implications? Be sure to end just as you started, with some nice music that suits the topic.

Bibliography: As this assignment will involve original research, you are required to produce a bibliography. It should be formatted properly. You may use EasyBib to help you with the formatting of our bibliography.

Examples:

Here are some examples of economics podcasts from Planet Money. Your podcast should be similar in its production to these.

Samples of last year’s student podcasts:

Your final product will be assessed using similar criteria for the internal assessment and will include the following:

1. Terminology – Terminology appropriate to the topic is used throughout the podcast – 2 marks
2. Application – Relevant economic theories are applied throughout the podcast – 2 marks
3. Analysis – There is effective economic analysis within the context of the topic and interview – 3 marks
4. Evaluation – Judgments are made using sound evidence and appropriate reasoning – 4 marks
5. Podcast Requirements – The podcast is presented in a highly effective manner, including a clear introduction with music, clear audio, at least one interview, a conclusion with music, and a bibliography formatted in MLA style. – 3 marks

Total – 14 marks

Aug 21 2012

## Introduction to Basic Economic Concepts – the Economics of Zoo Keeping

Introduction: This activity can be done individually or in small groups. It may be completed as a homework assignment or as an in-class activity. Divide the class into small groups (3 or 4 people). Each group is in charge of building a zoo.

Materials needed: Several A3 pieces of paper, scissors, tape or glue, and the images of animals available here.

Instructions for students: You and your teammates are the manager of a new business that has decided to open a zoo. Your zoo is a private, profit-seeking business that will charge admission to visitors. The purpose of the zoo , as with any business, is to earn a profit.

• You have to decide which animals to include in your zoo, but space is limited.
• You have 25 acres on which to build your zoo.
• Each type of animal requires a different amount of space, so you must choose which animals to put in your zoo. Remember, you need at least one male and one female of each animal so they can reproduce.

Below each animal is the number of acres just one of the animals requires. For example, one lion requires 2 acres of land. If you want four lions, therefore, you must use 8 of your 25 acres for lions.

Take a large piece of paper (at least A3) and using a marker, design the layout of your zoo. The paper represents the 25 acres you have for animals. Once you have decided which animals to include, how many of each animal, and calculated how many acres are to be used for each animal, cut out the animals you have chosen and paste each animal into its dedicated enclosure.

Once you have completed construction of your zoo, answer the discussion questions that follow.

Discussion Questions:

1. Did every animal make it into your zoo? Why or why not?
2. Did you include a turkey or a cow in your zoo? Why or why not?
3. Why didn’t you have a zoo with only monkeys?
4. Which type of elephant did you choose? Why did you choose the type you did and not the other?
5. What is the last animal to make the cut for your zoo?
6. What is the animal that just missed the cut for your zoo?
7. Did everyone in your group agree to include the the same animals?
8. Would everyone in your group have made the same choices if they did it alone?

Once you have answered the discussion questions, view this presentation, which provides answers to the above questions for discussion as a class.

Next »

• ## Order Welker’s books

for IB Economics

for AP Macro