Economics Articles

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

Does Fiscal Policy solve unemployment?

Posted on December 10, 2017

Readers Question: Is the fiscal policy effective/the best policy to deal with unemployment? It is an interesting question and one that is likely to generate different views from within the ranks of economists. To give a very rough overview: Keynesians say yes, fiscal policy can be effective in reducing unemployment. In a recession, expansionary fiscal policy …


Factors affecting Current Account Deficit

Posted on December 7, 2017

The size of current account deficit/surplus is affected by several factors including: Exchange rate (overvalued exchange rate would cause large deficit) Level of consumer spending (economic growth) and hence import spending Capital flows to finance deficit in long-term Saving rates – influencing level of import spending Relative inflation/competitiveness The current account measures: The balance of …


State Intervention and Market Failure

Posted on December 2, 2017

Readers Question: State intervention is necessary to maximize social welfare but intervention often comes at a heavy price. So why not rely on the market system to tackle the problem? It is one of the great debates of economics – How much should the government intervene in the economy. Firstly we have to consider occasions …