Christmas Quiz A view from London

Week of December 2, 2019

1. Four of the following were added to the basket of goods used to calculate consumer price inflation in the UK this year, while two were removed from the basket. Which were added?

a) Baking trays
b) Smart speakers
c) Three-piece suits
d) Dog treats
e) Envelopes
f) Electric toothbrushes

2. According to the World Happiness Report, which of the following is the most powerful predictor of an incumbent government’s vote share in an election?

a) Life satisfaction
b) GDP growth
c) Unemployment rate
d) Inflation rate

3. In which country was the world’s first negative interest rate mortgage launched this year?

a) Germany
b) Switzerland
c) Denmark
d) Japan

4. Which country organised an emergency onion airlift this year to shore up supplies of the vegetable and curb rapidly rising prices?

a) India
b) China
c) Bangladesh
d) Senegal

5. Which country is debating the merits of maintaining a national coffee stockpile for emergencies?

a) Australia
b) Colombia
c) Italy
d) Switzerland

6. Which country has the lowest unemployment rate among developed nations?

a) Czech Republic
b) Germany
c) Netherlands
d) UK

7. Which one of the following solutions would achieve the greatest reduction in carbon emissions by 2050, according to the climate research organisation Project Drawdown?

a) Plant-rich diet
b) Refrigerant management
c) Solar farms
d) Tropical forest restoration

8. In his now famous 1993 American Economic Review article, “The Deadweight Loss of Christmas”, Joel Waldfogel claimed that Christmas gift giving has a negative impact on welfare as people receive gifts that they would not be willing to pay full price for themselves. Who among the following is likely to give a Christmas gift that has the lowest value to the recipient compared to the price paid for it?

a) Significant other
b) Grandparents
c) Aunts and uncles
d) Friends

9. Of those employed in the UK, how many typically work on Christmas Day?

a) 1 in 10
b) 1 in 30
c) 1 in 50
d) 1 in 100

10. Which of the following Christmas puddings came top in a Which? magazine blind taste test this year?

a) Waitrose No 1 (£1.75 per 100g)
b) Asda Extra Special (77p per 100g)
c) Harrods (£3.08 per 100g)
d) Aldi Specially Selected (£1.62 per 100g)

Answers:

1. Four of the following were added to the basket of goods used to calculate consumer price inflation in the UK this year, while two were removed from the basket. Which were added?

Answer: a, b, d and f. Baking trays, smart speakers, dog treats and electric toothbrushes were all added. Three-piece suits and envelopes were among the items removed in the annual reshuffle of the 'shopping basket' used by the Office for National Statistics, which reflects changing spending habits of UK consumers.

Smart speakers such as Amazon Alexa and Google Home have been added to the index due to a rise in their popularity. In fact, according to retailer Argos, more UK households now own an Amazon Alexa device than have a pet rabbit. There is speculation that the fall in the number of new baby girls named Alexa, from 380 in 2017 to just 118 last year, is further evidence of the country’s uptake of smart speakers.

The inclusion of baking trays can be in part put down to the influence of television shows like ”The Great British Bake Off”. UK households have also been buying more electric toothbrushes and dog treats.

Three-piece suits were dropped from the basket, reflecting the trend of companies adopting more casual dress codes. Envelopes have also been removed due to the increased popularity of digital communication.

2. According to the World Happiness Report which of the following is the most powerful predictor of an incumbent government’s vote share in an election.

Answer: a. The report cites a study, which examined a set of elections in 15 EU countries since 1973 and found that national average life satisfaction has the greatest impact on the share of votes for the incumbent political party. Nine per cent of the variance in the incumbent party’s vote-share can be explained by national happiness, whereas economic growth explains around 6.5%. Unemployment and inflation rates can explain 4% and 3% of the variance respectively.

3. In which country was the world’s first negative interest rate mortgage launched this year

Answer: c. The first negative interest rate mortgage was launched in Denmark this year. Denmark’s third largest lender, Jyske Bank, has begun offering ten-year mortgages at -0.5%. Every month the outstanding mortgage balance will be reduced by more than the repayment amount. The bank’s economist Mikkel Høegh said the bank was able to borrow from money markets at negative rates and is simply passing that on to customers. However, the mortgage does carry significant fees and so it is likely that the mortgage holder will, over the lifetime of the mortgage, pay back more than they borrowed.

Each of the countries listed above has negative interest rates set by central banks. The other impact in a world of negative interest rates is that customers’ deposits may see no interest paid, and in some cases will be charged. In Switzerland, UBS announced that it would levy a negative interest rate on wealthy clients who deposit more than two million Swiss francs.

4. Which country organised an emergency onion airlift this year to shore up supplies of the vegetable and curb rapidly rising prices?

Answer: c. Bangladesh. Bangladesh flew in emergency supplies of onions amid a national shortage, which saw prices rise by a multiple of ten, to a record high. Bangladesh’s prime minister announced she had stopped eating onions and its largest opposition party called for a nationwide protest. The price rocketed after neighbouring India banned exports to conserve its own stocks after drought and heavy monsoon rains hit two harvests, sending the price soaring in India. India and China dominate the market for onions, accounting for just under half of global production. A squeeze in supply disproportionately affects South Asia as the humble onion is a key ingredient in curries and, therefore, a major political flashpoint. In India, Indira Gandhi came to power in 1980 by highlighting rising onion prices as evidence of the government’s economic mismanagement.

5. Which country is debating the merits of maintaining a national coffee stockpile for emergencies?

Answer: d. Switzerland. Switzerland has maintained large stockpiles of essential goods since the 1920s, having experienced severe shortages during both world wars. It still maintains these stockpiles in case of natural disaster, epidemics or supply chain disruption. The government covers the costs of storing these goods, which include water, medicine, animal feed, fuel, cooking oil and even coffee. In April 2019 the Federal Office for National Economic Supply proposed to reduce the cost of the stockpile by no longer including coffee, which it did not deem “essential for life”. However, in the face of popular and business support for the 15,000 tonne coffee reserve, the office has said it will reconsider its plan.

6. Which country had the lowest unemployment rate among developed nations?

Answer: a. Czech Republic. According to Eurostat, in October the Czech unemployment rate stood at 2.2%, the lowest among developed economies. The Czech Republic owes its low unemployment rate to a competitive manufacturing sector, which accounts for about a third of GDP and employment. This is mainly due to the Czech Republic’s integration into European automotive supply chains, driven by government incentives and low labour costs. This trend appears to be bottoming out, due to the slowdown in Germany and the global auto sector, and to soaring wage growth as vacancies outnumber unemployed workers. The unemployment rate is also flattered by a shrinking labour force caused by an ageing population and low birth rate.

7. Which one of the following solutions would achieve the greatest reduction in carbon emissions by 2050, according to the climate research organisation Project Drawdown?

Answer: b. Refrigerant management. According to Project Drawdown, managing leaks and disposal of chemical refrigerants (known as HFCs) used in refrigerators and air conditioners has the highest emissions reduction potential, because HFCs warm the atmosphere 1,000-9,000 times more than carbon dioxide. The Montreal Protocol, ratified by all UN members, calls for the world to phase out HFCs over the next decade. However, 90% of refrigerant emissions happen in the disposal process, so effectively storing the HFCs that would otherwise be released over the next 30 years could avoid emissions equivalent to 89.74 gigatonnes of carbon dioxide.

Refrigerant management is ranked first among Project Drawdown’s 80 solutions. A plant-rich diet is ranked fourth, as it reduces the carbon emissions from meat production and deforestation. Tropical forest restoration is ranked fifth for the carbon it sequesters in soil and biomass. Solar farms are ranked eighth, assuming solar power grows from 4% of global electricity generation currently to 10% by 2050.

8. In his now famous 1993 American Economic Review article, “The Deadweight Loss of Christmas”, Joel Waldfogel claimed that Christmas gift giving has a negative impact on welfare as people receive gifts that they would not be willing to pay full price for themselves. Who among the following is likely to give a Christmas gift that has the lowest value to the recipient compared to the price paid for it?

Answer: b. Grandparents. According to Mr Waldfogel’s research, the shortfall in value compared to the price paid, averaged across all gifts, was approximately ten per cent to a third. The shortfall increased the greater the age difference between the giver and receiver with grandparents giving the least efficient gifts. Grandparents were however found to be the most likely to give cash – the universally accepted voucher. It is possible, of course, that Christmas does not relate to economic efficiency.

9. Of those employed in the UK, how many typically work on Christmas Day?

Answer: b. Approximately 1 in 30 work on Christmas Day, according to estimates by the Office for National Statistics. Of the roughly 1.1 million workers who do so, 300,000 worked as carers or nurses. Hospitality, retail and security professions also feature highly. Those most likely to be working are the clergy, with over half the profession at work on the 25th.

10. Which of the following Christmas puddings came top in a Which? magazine blind taste test this year?

Answer: d. Aldi’s Specially Selected pudding came first in the test conducted by Which? magazine, scoring 76%, well above more expensive offerings from Waitrose (72%) and Harrods (67%). The panellists described the Aldi pudding as “packed full of rich fruit and nuts with an orangey kick”. The Asda pudding (73%) was also praised for being “a people pleaser and a bargain” and rated above those from Waitrose and Harrods.

PS: We recently wrote about shifting consumer preferences in the auto industry away from small cars in favour of sport-utility vehicles (SUVs). SUVs account for 40% of global car sales, up from 17% in 2010, and account for four of the top ten-selling models in the UK. We were surprised to learn that the shift to more fuel-hungry SUVs has offset the improved fuel economy of smaller cars and the rise of hybrid and electric models. The International Energy Agency estimates that “SUVs were the second-largest contributor to the increase global carbon emissions since 2010”, ahead of heavy industry and aviation, highlighting the ever-shifting challenge in tackling climate change.

PPS: Last month we noted that global trade was slowing well before the latest US-China trade spate. One factor in this slowdown has been the rising cost of trade finance caused by the tightening of financial regulation under the Basel III regulatory regime. Higher capital and liquidity standards and tougher compliance requirements have led, according to one study, to a 23-40% rise in the cost of trade finance.