AMF Releases March 2016 Edition of “Arab Economic Outlook Report”

Inflation rate for Arab countries as a group declined to 6.5 percent in 2015 compared to 8.1 percent in 2014. The AMF report referred to a group of factors that affected domestic price levels in Arab countries in 2015. On top of these factors, the decline in imported inflation either due to lower international oil prices or as a result of the appreciation of the US dollar against some other major currencies, in addition to the impact of lower economic growth and tightening of monetary policy in some Arab countries. On the other hand, some Arab countries witnessed inflationary pressures resulted from policies that have been adopted to reduce subsidies.
In 2016, the report expects inflation rate for Arab countries as a group to rise to 7.4 percent in 2016, reflecting the inflationary pressures resulted from the ongoing governments’ efforts to reform subsidy systems. In addition to the expectations of increased inflation rates augmented by demand pull factors, due to the expected rise in wages and salaries in some Arab countries. On the other hand, the shortage in the supply side for goods and services in some Arab countries that witness internal developments will be reflected on the domestic price level in these countries. Furthermore, some Arab countries will witness inflationary pressures due to the depreciation of their local currencies. These circumstances could increase the pass through effect of local currencies depreciation to the domestic prices. On the contrary, the decline in oil prices combined with the reduction in investment expenditure would lessen inflationary pressures in a number of Arab countries this year.

What is the relationship between the cost of living and inflation? Your task is to write a structured essay in which you explain and analyse the above article in terms of course concepts and apply what you learned in the time of COVID-19. You are expected to answer the four parts of the following question:
Part (a) Give an updated brief description of the cost of living situation in the country you are living in.

Part (b) Analyse the situation you describe in part (a), using economic theories and concepts from Chapter 1 Running the Economy text book.

Part (c) Discuss the economic and social implications of the cost of living described above in (a) and (b) in the light of COVID-19.

Part (d) Discuss what policy makers could learn from your description and analysis in parts (a) to (c).

Part (a)
Virtually everybody in all societies gets in touch with cost of living in some shape or form. We usually ask questions about human well-being in a variety of contexts; for example, from the personal – ‘Am I better off than I was five years ago?’ through the local – ‘Are we better off than our grandparents?’.  Almost everyone is living with the cost of living and the results come out from inflation fluctuations. In other words, cost of living differences are often reported in the form of cost of living indexes. The idea in this TMA is to show how the economic theory of inflation can be used to measure the standard of living. You can use an example of your own and give a bit of detail about your example, enough to be able to analyse it using course concepts, but be mindful of the word limit. It is probably best to spend no more than about 300 - 400 words on this part.

Part (b)
In this part of the TMA you are required to select course concepts from chapter 1, Running the Economy textbook and use these concepts to analyse your examples from part (a). Choosing appropriate course concepts and then applying them to your country as a real-life example is an important part of academic practice and for making course content relevant to work contexts. In this part of the TMA, you should first state which concept you have chosen and what study sessions they come from, before giving a brief description or definition of these course concepts. You should then explain how these concepts can be used to analyse the above article and explain the facts that you described in part (a). Part (b) is the weightiest part of the TMA and carries the highest proportion of marks. It is expected to spend no more than 500 words on this part.

Part (c)
This part of the TMA asks you to consider the economic and social implications of the article and the updated information you gave in part (a). You should start by stating whether or not you think there are any socioeconomic implications arising from this situation. You may present your work in terms of expressions or equations and the results obtained, translate your data into diagrams and match the theory with the application you have selected. If you feel there are no socioeconomic implications whatsoever, you should explain why you think this is the case. You should spend no more than 200 to 300 words on this part of the TMA.

Part (d)
The final part of the TMA asks you to think about how the issues you have discussed in parts (a) (b) and (c) could help policy makers. What could the people living in your society you have described in part (a) learn from your analysis in parts (b) and (c)? You should make some suggestions about how they could improve their standard of living (even slightly– there is always room for some improvement) or on what aspects of their practice they should concentrate most. These suggestions should follow logically from your discussion in part (b) and/or (c) and can relate to any aspect of economic practice discussed in chapter 1. Again, you should spend no more than about 350 to 450 words on this part of the TMA.