Hello and welcome to the Economics Department here at Reigate College.
My name is Oliver Wright and I’m the Head of the Economics Department. Economics is a relevant and challenging subject and I’m really pleased you’ve chosen to study it. I’m looking forward to welcoming you to the department in person at the beginning of the academic year.
Many of you won’t have studied Economics as a separate subject before, so it’s really important you’re fully prepared before you embark on the A Level course. With that in mind, I’d like you to complete a series of tasks and activities over the coming months to introduce you to some of the topics you’ll be studying. You should also aim to read newspapers and journals (many are available for free on-line) to keep up to date with the latest economic developments, especially during these unprecedented times.
The tasks are organised in three distinct steps and should all be completed by Choices Day on 28 August 2024. This is to give you the best insight into what the courses will be like and/or help prepare you for them.
Please note, some Course Leaders (for example for Music) may release their tasks earlier, as they may form part of the College’s audition process. If this applies to you, you’ll be notified separately.
New Starters Course Tasks and Activities
Release date | Suggested Completion Dates | |
Explore your Subject | 1 June | 1 July |
Get Going | 1 June | 1 August |
Aim High | 1 June | 1 September |
Explore your Subject
Read the following article adapted from the ONS (Office for National Statistics) and complete the tasks below:
The nationwide lockdown undertaken to protect the country from the onset of the COVID-19 pandemic led to an unprecedented fall in UK GDP. Public health measures including social distancing, travel restrictions and closure of non-essential shops drove a 19.8% fall in GDP between April and June 2020. Household spending fell by over 20% over this period, the largest quarterly contraction on record, which was driven by falls in spending on restaurants, hotels, transport and recreation
The furlough scheme, affecting a total of 11.6 million jobs, significantly curbed the labour market impact, with the unemployment rate rising from 3.8% at the end of 2019 to 5.2% by the end of 2020.
As restrictions were lifted GDP largely recovered by 17.6% in the third quarter of 2020 – between July and September. Household spending rose by 19.6% in the third quarter of 2020, with higher spending in restaurants, hotels and on transport. In the year to June 2021, average house prices rose 13.5%. Borrowing costs were cut to historic lows as the bank rate was lowered to 0.1% in March 2020. In the year to June 2021 average house prices rose by 13.5%, helped by the waiving of stamp duty on house purchases up to £500,000.
Despite a 1.2% drop in GDP over the first three months of 2021 with the emergence of the Delta variant and subsequent lockdown, the rest of the year saw incremental growth. Household spending rose once more in spring (8.5%) and summer (2.6%) 2021 – making a steady return to pre-coronavirus pandemic levels. GDP had returned to pre-coronavirus pandemic levels by the first quarter of 2022. After a period of historic lows, CPIH inflation rose from 0.5% in August 2020 to 7.8% by April 2022, precipitated by rising fuel costs and the war in Ukraine.
Task 1: Find out what the following terms mean and define them:
A) GDP
B) Furlough scheme
C) Inflation
Task 2: Outline three impacts on individuals and three impacts on the economy of the COVID-19 lockdowns.
Get Going
Studying economics will require you to be aware of current affairs and how they might relate to what is being taught in the classroom. This means undertaking some research.
Task 1: Find an article on each of the following areas relating to the UK’s economic performance
• GDP growth
• Inflation
• Jobs
• Trade
Sources
The following are a suggested list of sources. You can use others if you wish.
• BBC: https://www.bbc.co.uk/news
• Independent: https://www.independent.co.uk/
• Financial times: https://www.ft.com/
• Guardian: https://www.theguardian.com/uk
• Trading economics: https://tradingeconomics.com/
Bring 2 of these articles into your first few lessons, as this will form a basis for discussion. Ensure you take note of where you source your articles.
Aim High
Read the following article adapted from the BBC and answer the questions below.
Original: https://www.bbc.co.uk/news/business-64311461 accessed 27/02/23
Price rises in the UK slowed for a second month in a row but the cost of food including milk, cheese and eggs kept inflation at a 40-year high.
Inflation, which measures the rate of price rises, fell to 10.5% in the year to December from 10.7% in November. Petrol and diesel costs eased last month but food prices continued to soar, reaching the highest since 1977. Restaurants and hotel prices also jumped in December along with a record rise in air fares.
Millions of people are struggling with the cost of living which has been rising steadily as Covid restrictions eased and Russia launched its assault on Ukraine. Food prices rose 16.8% in the year to December as many families splashed out for Christmas, according to the Office for National Statistics (ONS). Basics such as milk, cheese and eggs saw the largest increases. Prices for sugar, jam, honey and chocolate as well as soft drinks and juices also jumped. However, price growth slowed for bread and cereals.
Inflation is the increase in the price of something over time and to calculate it, the ONS keeps track of the prices of hundreds of everyday items. If it falls, it does not mean the prices of goods are going down, it just means prices are rising more slowly. Some analysts believe that the cost of living may now slowly be beginning to ease after hitting what is believed to be the peak, of 11.1%, in October. But at 10.5%, UK inflation is still way above the 2% target the Bank of England is charged with meeting.
Grant Fitzner, chief economist at the ONS, told the BBC’s Today programme that a driver behind inflation dipping was because petrol prices had dropped 8p per litre last month, while diesel had fallen by 16p per litre. Average petrol and diesel prices stood at £1.55 and £1.79 per litre in December 2022. “It is important to point out although we’ve seen a second consecutive easing, it is fairly modest fall and inflation is still at a very high level with overall prices rising strongly,” he added. There are some barriers to a sharp fall in inflation. Mr Fitzner said that private sector pay, which grew 7.2% in the three months to November, was at the “strongest for many decades”. Average pay overall has grown at the fastest rate in more than 20 years, but is still failing to keep up with rising prices. Coach and air fares also showed grew strongly in December, with the cost of plane travel up 44.1% – the largest recorded rate since January 1989
Despite inflation dipping for the second month in a row, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said there was still a “long way to go before the price spiral is under control. With the jobs market still tight, energy set to stay elevated and relentless food price rises continuing it will mean inflation stays stickier for longer,”
The Bank of England has been raising interests since December 2021 to quell rising prices – the are currently 3.5%. The Bank will hold its next rate-setting meeting in February. Increasing interest rates is one way to try and control inflation as it raises borrowing costs and should encourage people to borrow and spend less. Ms Streeter said the UK should be braced for further interest rate rises from the Bank, adding that a half a percentage point rise “is still firmly on the cards”.
Inflation is forecast to more than halve over the coming year, not because of any government action, but because it compares prices now with a year ago. The big jump in fuel prices began last February. Once we get to March the difference between current prices and those 12 months before won’t look quite as striking. So far, the official forecasts from the Office for Budget Responsibility have proved relatively accurate, anticipating inflation would peak at around 11%, which it did last autumn, before falling back. It has forecast the rate of inflation will fall to less than 7% by this summer and 4% by the end of the year, but what’s hard to imagine now is that it also forecasts inflation will turn negative in the middle of 2024. While that may mean the cost of living falls a little, it won’t be anything like enough to make up for the drop in living standards this inflation is expected to cause – the worst in over four decades.
Chancellor Jeremy Hunt said while any fall in inflation was “welcome”, it was “vital” that the government took “difficult decisions” to try to bring it down further. But Shadow Chancellor Rachel Reeves said: “Each passing day brings more and more evidence that people are feeling worse off under the Tories.” Prime Minister Rishi Sunak has pledged to halve inflation this year, but many forecasters have predicted this will happen as the cost of energy falls. “High inflation is a nightmare for family budgets, destroys business investment and leads to strike action, so however tough, we need to stick to our plan to bring it down,” Mr Hunt said..
TASK: Answer the following questions. Bring your answers with you to your first lesson. A sensible amount to write is given in brackets after each question.
- What have been the key drivers of inflation? (Identify 3, a couple of sentences on each)
- Why is inflation slow to fall? (Identify 3 reasons, a couple of sentences on each)
- What is the difference between inflation falling and prices falling? (1 paragraph)
- Why is inflation harmful? (a couple of sentences)
- Give one example of how the recent inflation has impacted you. (a couple of sentences)