Economics Articles

Essays on topical issues, latest developments in UK and global economies, and answers to readers questions

Letter of 365 economists – did they really get it wrong?

Posted on August 13, 2019

The March 1981 UK budget was controversial. In a period of rising unemployment, recession and high inflation. The government pursued deflationary fiscal policy trying to reduce inflation. The chancellor increased taxes by a total of £4 billion, with the aim of reducing inflation and reducing the budget deficit. Tax measures included A new 20% tax …


Bank Runs

Posted on July 15, 2019

Bank run definition A bank run occurs when there is a sudden demand to withdraw money from a bank, that the commercial bank struggles to meet. The first signs of ‘bank panic’ will encourage other depositors to also try and withdraw their savings, causing a further ‘run on the bank.’ In a bank run, investors …


Does a lower budget deficit lead to lower interest rates?

Posted on July 11, 2019

Readers question: Keeping a lower deficit of the National Budget would benefit Americans as interest rates would remain stable and allow new businesses to grow. Would you say this statement is correct? In theory, there is an argument that a rising deficit can cause a rise in bond yields and interest rates. Similarly, there is …