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University of Westminster  

Westminster Business School

CURRENT ISSUES IN BUSINESS ECONOMICS

(Code 4EQM7C2)

COURSEWORK 

Semester 2, 2012

The coursework will consist of an individual assignment.

The validated syllabus lays down that assessment is weighted 30% oncoursework and 70% on an end-of-semester examination.

DEADLINE : To be handed in at the Marylebone Road Coursework Lobby nolater than Monday 30 April, 2012

NB 

The word limit is 2000 to 2500 words.

Please do not submit your coursework in folders, binders etc. All folders,

binders, plastic bags etc. attached to work will be disposed of. Simply staplethe work to the standard Coursework coversheet. We CANNOT readdrafts of your work. 

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Answer one of the following three questions: 

Question 1

For this question you have to answer all sub questions a.b.c.d.Imagine that you are part of the strategy team at company ABC, which producesproduct X, and markets in the domestic as well as global markets in 2012 amidst theglobal recession. This can be an imaginary product, or an existing product. Brieflydefine the product and the industry you are operating in.

a.  What are the alternative scenarios with regards to the costs of production (inparticular the costs of raw materials and energy given the multiple dimensionsof the crisis – i.e. energy crisis, rising commodity prices etc.)?

b.  Consider the macroeconomic expectations for 2012 and different scenariosabout the macroeconomic developments and the course of the recession. Think

of the developments in demand in different markets domestically and globallyas well as different market segments with respect to different income levelsand demand elasticity of your clients? Also consider the availability of closesubstitutes for your product. How will demand develop in your markets? Whatis the effect of the recession on the demand for your product?

c.  How could government policies (e.g. cuts in public spending, tax changes,changes in interest rates) affect the demand for your product or thelegal/regulatory environment you are operating in?

d.  Prepare different scenarios about the developments in the currency marketsand their effect on the price competitiveness of your company. Discuss theeffects of changes in the currency on your output price as well as input costs.

Some useful references from the press:

The Economist, 2011, Nowhere to hide, October 15.

Harding, Robin. 2011. Pay gap a $740bn threat to US recovery, Financial Times,December 14, 2011

Wolf, Martin. 2012, The 2012 recovery: handle with care, Financial Times, January 3,2012

Academic papers/reports:

Financial Stability Authority, 2009. What went wrong? Chapter 1 of The TurnerReview. A regulatory response to the global banking crisishttp://www.fsa.gov.uk/pubs/other/turner_review.pdf  

Onaran, Ö., 2011. “From wage suppression to sovereign debt crisis in WesternEurope:Who pays for the costs of the crisis?” International Journal of Public Policy,7(1-3), 51-69

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Question 2

For this question you have to answer all sub questions a.b.c.d.

Choose one country that is a member of European Union (EU), but it is not part of the

European Monetary Union (EMU).a) Consider the extent to which your selected country currently meets each one of theconvergence criteria.b) Explain and discuss, using relevant economic theory and appropriate statistics, thecosts and benefits associated with the decision of joining the EMU.c) Please consider also historical factors and political issues that could have somebearing on the above decision.d) Attempt to weigh all the advantages and disadvantages related to points b) and c)and conclude whether it would be convenient for your chosen country to adopt theeuro. Please consider also how possible future political and economic events couldaffect this decision.

Some useful references

Feldstein, M (1997) The Political Economy of the European Economic and MonetaryUnion: Political sources of an economic liability, Journal of Economic Perspectives,11(4), pp. 23-42HM Treasury (1997) UK Membership of the single currency. An assessment of thefive economic testsGanev , G. (2009) Costs and benefits of euro adoption in Bulgaria (2009)http://www.finess-web.eu/publications/wp/FINESS_D_5_3_Ganev.pdf  

Question 3

Is there a link between innovation and competition?

ReferencesAghion, P, N. Bloom, R. Blundell, R. Griffith and P. Howitt, “Competition andInnovation: An Inverted-U Relationship”, Quarterly Journal of Economics 120 (May

2005): 701-28.Sharpe A., and Currie, I. , Competitive Intensity as Driver of Innovation andProductivity Growth: A Synthesis of the Literature, CSLS Research Reports fromCentre for the Study of Living Standards, No 2008-3 (2008)