Economics Students Call For Base Rate Cut

In these troubled economic times, it seems that everyone is talking about the Credit Crunch, recession, banking failures and Interest Rates. Setting the right Interest Rate has never been more important and this was the challenge laid down to a group of Tollbar Sixth Formers who took part in the Bank of England's Target 2Point0 competition recently.

Every year, the Bank runs the nation-wide challenge, which requires students of economics to assume the role of the Monetary Policy Committee (MPC). They have to review all the available economic data and put together a fifteen minute presentation to a team of judges at a series of Regional Heats.

The Tollbar team consisted of Captain Daniel Taylor, Liam Norton, Adam Thompson and Jade Auckland. Jade is the first Year 12 student to represent Tollbar in the competition and performed very well despite having studied Economics for just three months. The four were supported by Jon Bishop and Matthew Neale who helped with their preparations and who also travelled to the event along with teachers Vince Groak and Gemma Hirst.

The regional heat was held in Grantham on the 26th November and Tollbar were up against seven other teams from the East Midlands region, including six private schools.

In advance of the presentation, the team spent many hours revising their macro-economic knowledge, pouring over economic data and discussing the outcome. Just like the MPC do every month, in fact.

Team member Liam Norton felt that the main issue influencing their decision was the very real risk of deflation. "Most people think that deflation would be good as it means consumers can buy more. That is not true. Deflation leads to deferred spending and a general contraction of Aggregate Demand. It was the risk of deflation that led us to propose another significant cut in interest rates."

In the end, the team collectively plumped for a further cut in rates by 0.75% and put together a detailed presentation to support their decision.

Tollbar acquitted themselves very well, putting forward a very strong argument for a further cut in rates. Their delivery was confident and interesting and the students showed very good presentation skills under great pressure. There followed a series of questions from three Bank of England employees which really tested the students' understanding of economics. They came through unscathed and were pleased with their performance, although they accepted they had learnt some important lessons.

"It was really tough," said Captain, Dan Taylor, "the questions were very tricky and put us on the spot. Our knowledge was okay but we would have spent more time trying to anticipate the questions if we did it again."

In the event, Tollbar finished outside of the top two but the competition was still hugely beneficial to the students, says Economics teacher Vince Groak. "The competition is good on many levels, firstly it develops the students' skills of presentation and argument and secondly, it hones their economic understanding. But, more importantly, it brings the subject to life and allows them to see just how important economics is to our everyday lives."

The Tollbar team give their reasons for a radical cut in interest rates. From left to right, Daniel Taylor (captain), Jade Auckland, Liam Norton and Adam Thompson.