1. workers’ qualification
financial markets
exchange rates
price level
interest rates
goods markets
economy
sales expectations
labor markets
labor costs
workers’ qualification
company
as a system
technology
innovations
know-how
government
financial policy
laws and
regulations
foreign countries
Competing on:
location
innovation
gov. policies
prices
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2. economic schools of thaught
goals of economic policy
economic agents
partners of wage agreement
wage policy
government
fiscal policy
central bank
monetary policy
application of instruments to achieve goals
discretionary (occasional control)
regulation bound (active, passive)
automatic effect of instruments

3. creation of appropriate conditions for market dynamics
supply-side
long-term
demand-side
short-term
characteristics
theoretical
basis
(Neo)Classical
Keynesianism
creation of appropriate
conditions for market dynamics
(stability of private sector)
active stabilization
policy to compensate
instability of private sector
government view
steady,
regulation bound
growth policy
anti-cyclical
discretionary
stabilization policy
strategy
real
GDP
growth
real
GDP
trend
time
time

4. net exports (exports - imports)
unemployment rate
in %
1995: 8,8
2000: 9,3 10 9 8 7 6 5 4 3
net exports (exports - imports)
in % of GDP 2
growth of real GDP
in % 1 1 2 3 4 5
1995: 0,6
2000: 1,9
1995: 1,7
2000: 3,0 1 2 3 4 5
year 2000
year 1995
inflation rate in %
(consumer prices)
1995: 1,9
2000: 1,4

5. Level of goals contents macroeconomic level meso-economic level
price stability
high employment
appropriate economic growth
foreign trade equilibrium
fair distribution of income and property
environmental protection
balanced budget
macroeconomic level
meso-economic
level
(structural goals)
balancing of regional wages
efficient supply of energy
reduction of subsidies
freedom of decision-making for companies and private households
freedom of contract
competition
microeconomic level
continued, non-inflationary and ecologically sustainable growth
high employment level
high level and stable social net
increase in quality of life
convergence of economic output among member states
European level

6. indicator (measurable)
objective projection
objective
indicator (measurable)
result
difference
change of cost-of-living-index or
of harmonized consumer price index in %
stability of price level
< 2%
appropriate,
continuous growth
growth of real GDP in %
2-3%
high employment level
unemployment rate in %
< 10%
foreign trade equilibrium
part of exports and imports balance
in % of GDP
1,5-2%
current budget deficit
in % of GDP
stable gov. financing: „Budget criteria“
of the Maastricht Treaty
< 3%
current government debt
in % of GDP
< 60%
growth of wages in %
< 2%
„fair“ income distribution
growth of profit in %
< 3%

7. “gap analysis” (comparison of target/actual values)
time
“gap analysis” (comparison of target/actual values)
no need for action
retaining of previous economic policy
need for action
cause analysis
choice and application of instruments
evaluation of effects of applied instruments

8. late indicators early indicators present indicators
retail sales
production
investment
consumption
capacity utilisation
wages
prices
unemployment
late indicators
business
climate
consumption climate
order inflows
building permissions
orders
share prices
profit expectations
income expectations
early indicators
present indicators
- 9
- 6
- 3 3 6
months

9. population (electorate)
central bank
(autonomous)
government
national (Federal Government and the Länder)
European (Council of Ministers)
national
European
parties,
parliament
associations
bureaucracies
ministries
EU-Commission
unions and
management
population (electorate)

10. differentiation criteria examples
scope for decision-making
big
discretionary,
occasionally
small
bound by rules
none
automatism
command
medium
inducement
voting
arranging
qualitative
quantitative
production prohibition, production commandment
changes in taxes and interest rates
obligations of intervention in the EMS II
sanctions of the Stability Pact
wage negotiations
reduction of bureaucratic restraints
changes in taxes and interest rates in discretion
due to progressive taxation - automatic loss of taxes in recession - automatic surplus of taxes in boom
intensitiy of governm. intervention

11. ECB Council (supreme committee of decision of ESCB)
directorate
president
vice president
four other members
nomination by EU Council of governments heads
single period of 8 years, re-election not possible administration of current transactions
extended by
Non-EMU members GB DK CH
ECB Council (supreme committee of decision of ESCB) D GR F I A
FIN E
IRL P B L NL
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presidents of national central banks from the current twelve member states of the EMU
nomination in national procedure
period 5 years, re-election possible

12. M P U M3 = 4.5% < 2% Y = 2 to 2.5% = - 0.5 to -1%n U
reference value for 1 year M3
= 4.5%
stable development of prices
potential growth of
real GDP
change of velocity
of money circulation
< 2% Y r
= 2 to 2.5%
= to -1%
> 4,5%, If
inflationary risk will be signalled
due to the forerun character
of money supply
result
In-depth analysis of causes
if necessary application of instruments of monetary policy

13. fiscal policy built-in flexibility Re-distribution stabilisation
allocation
anti-cyclical
cycle-independent
discretionary
rule bound
built-in flexibility

14. minister of social affairs and labour
department
objective (examples)
allocation
distribution
stabilization
fiscal objectives
minister of finance
superior:
improvement of production conditions of location Germany
safeguarding competitive environment
sustained economic growth
minister of
economics
reduction of unemployment
financing of social security systems
(e.g. pension funds)
minister of social affairs and labour

15. criteria of Maastricht
GDP
growth trend
business cycle
time
budget -
time +
budget deficit
in recession;
limited by
Art. 115 Constitution and
criteria of Maastricht
budget surpluses
in boom

16. tax policy stabilization distribution allocation
influencing of economic situation and growth
(fiscal policy)
distribution
correction of income and property distribution
allocation
influencing
the use of
factors of
production
and the
consumption of
goods & services

17. income tax burden
in % 50
48,5%
42% 40
marginal tax burden
tariff 2002
tariff 2005 30 20
19,9%
average tax burden
15% 10
taxable income
in EUR 5 10 15 20 25 30 35 40 45 50 55 60

18. government consumption expenditures (expenditure concept)
example 1999
figures in billion EUR
government expenditure
941 1
wide analysis
= 0,4863 =
48,63%
GDP (nominal)
1.935
government consumption expenditures 2
tight analysis
(expenditure concept)
369
= 0,1906 =
19,06%
GDP
1.935 3
tight analysis
(consumer concept)
collective consumption
154
= 0,0795 =
7,95%
GDP
1.935 Ad 1
inclusive monetary transfers of social security,
attributable property transfers 2
without monetary transfers of social security 3
without direct attributable property transfers of government to private households

19. government fixed capital formation (+)
government deficit,
loan-financed (+)
gross domestic product,
nominal (+)
government fixed capital formation (+)
interest rate (+)
price level (+)
money market effect
negative effect on other
Components of aggregate demand

20. interest payment burden ratio
net borrowing =
revenues - expenditures (of one financial year)
net borrowing of government
GDP (nominal)
deficit ratio =
total government debt
debt ratio =
GDP (nominal)
total government debt
debt per capita =
population
interest payment of government debt
interest payment burden ratio =
GDP (nominal) or government expenditure

21. net govern- ment borrowing
bill. EUR
expen- ditures
257
253 5
250 10
net govern- ment borrowing
budget surplus 15 21
247
revenues
238
229
2002
2003
2004
2005
2006
2007

22. objective trade unions employers
autonomous
partners in wage
negotiations
objective
high wage increases to improve income distribution position of employees,
depending on national economic labor market situation:
wage restraint where necessary, if jobs are created in return
trade unions
low wage increases; high net profits and flexible labor market regulations, which give scope for investment and meet the companies‘ needs
employers

23. compensation of employees
private households
companies
employers‘ contribution to social security
employees‘ contribution to social security
compensation of
employees
gross wages
taxes
disposable income
net wages
prices
real disposable income

24. output-related wages policy
key figures
initial position 1. 2. 3. 4. 5. 6. 7. 8. 9.
10.
11.
12.
13.
14.
production result
working hours
productivity of labor (1:2)
wages per hour
sum of wages (2x4)
unit labor costs (5:1)
material costs/unit
other costs/unit
costs/unit (6+7+8)
selling price
revenue (10x1)
costs (9x1)
profit (11–12)
profit/sum of wages (13:5)
4.000
1.000 4 16
16.000 25 10 39 40
0,25
EUR
4.200
1.000
4,2
16,8
16.800 4 25 10 39 40
0,25
EUR
(+ 5%)
results:
a) No cost push from wage increases and hence no price increase
b) increase of productivity will be equally distributed on labor and capital (5%)
c) income distribution (profit/sum of wages ) remains unchanged

25. feedback if missing of goal is persistent
recognition
lag
effect lag
decision lag
realization lag
information
diagnosis
cause
starting
development
time
internal lag
external lag