M4 Growth in UK (2009)

M4 Growth in UK (2009)

M4 is known as the ‘broad money supply’. It is a measure of notes and coins in circulation (M0) + bank accounts. This includes private-sector retail bank and building society deposits + Private-sector wholesale bank and building society deposits and Certificate of Deposit. The Bank of England produce figures on M4 growth. Money supply growth provides a rough guide to the state of the economy – economic activity and inflationary pressure. However, money supply figures can often be unreliable and affected by many issues. Nevertheless the economic recession has caused…

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How Quantitative Easing Works

An explanation of how quantitative easing works in theory and practise. Readers Question How is quantitative easing expected to benefit the UK economy looking at the current situation of the economy. Readers Question: One more, is quantitative easing and stimulus package is the same? The stimulus package refers to expansionary fiscal policy. This is tax cuts and government spending increases designed to increase aggregate demand through higher government borrowing. Quantitative easing involves increasing the money supply through the creation of money. The fear is that the UK economy is declining very rapidly. GDP growth…

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Main Problems in UK Economy

Readers Question: What are the main problems in UK since the recession started? Decline in GDP. The IMF recently forecast UK GDP would decline by 3.8% in 2009. This makes the recession very deep. Rise in Unemployment. Unemployment figures recently passed 2 million and there is every likelyhood it will rise to 3 million by the start of 2010. Unemployment is the biggest cause of relative poverty in the UK. Unemployment is the most damaging event to people’s quality of life. It is not just the decline in income, but the…

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Funny Holiday Complaints

These reminded me of the excellent Monty Python Sketch – Travel Agents. “We bought ‘Ray-Ban’ sunglasses for five euros (£3.50) from a street trader, only to find out they were fake.” “We booked an excursion to a water park but no-one told us we had to bring our swimming costumes and towels.” “On my holiday to Goa in India, I was disgusted to find that almost every restaurant served curry. I don’t like spicy food at all.” It’s lazy of the local shopkeepers to close in the afternoons. I often needed to buy…

World Financial Crisis AD/AS diagram

World Financial Crisis AD/AS diagram

Readers Question: how to illustrate the world financial crisis by using the graphs of aggregate demand and aggregate supply? The financial crisis has essentially caused an unprecedented fall in aggregate demand. Aggregate demand has fallen because: Bank lending decreased due to the credit crisis and shortage of bank funds. The shortage of bank lending has reduced investment and consumers spending (both components of AD) Falling house prices. The credit crisis has reduced the availability of mortgages and therefore reduced demand for buying houses. Also house prices were…

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Indian Economic Slowdown

Readers Question: what are the causes of recession in india now a days? India is not in a recession. What is happening is that the growth rate is slowing down from 7% a year to an estimated 5.5% to 6.5% (link) India’s economy has been slowing down because: Fall in exports to US, Europe and rest of the world. Although India is somewhat more detached from financial crisis than other countries, it is still affected by the global slowdown which leads to less demand for India’s exports. This is particularly acute…

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Regional Unemployment in UK

Readers Question: Why are there large differences in the unemployment rate across different regions of the UK? In the 1980s regional differences in unemployment were greater. To some extent regional differences in unemployment have narrowed in recent years. However, differences still exist. Some reasons include: Decline of Industry. Some areas relied on certain industries to provide a large % of jobs. If these industries close down then areas suffer from a high rate of unemployment. A good example, was when coal mines closed down in certain areas. It led to high…

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Multinational Corporations in Developing Countries

Readers Question: I have to debate why multinational corporations are good for developing countries, and I know the arguments for them being bad are strong so are there any really good positive arguments I could use to smash the opposition? Thankyou so much Arguments for Multinational Corporations in developing countries. They Provide an inflow of capital into the developing country. E.g. the investment to build the factory is counted as a capital flow on the financial account of the balance of payments. This capital investment helps the economy develop and increase…