A-Level

Economic Growth UK

Economic Growth UK

Economic growth measures the change in real GDP (national income adjusted for inflation; ONS call it chained volume measure of GDP) In 2016 the UK economy grew by 1.8% –  (compared to 2.2% in 2015. In the first half of 2017, the economy has grown by just 0.5% (annualised growth of 1%) Q1 0.2% | Q2 0.3% The peak to trough fall of the economic downturn in 2008/2009 is now estimated to be 6.0% Figures for Q2 2017 show the economy is reliant on consumer spending, with…

UK Inflation Rate and Graphs

UK Inflation Rate and Graphs

Current UK Inflation Rate CPI inflation rate:  2.6% (headline rate) CPI – D7G7 at ONS (page updated 18 July 2017) Source: Raw data General inflation tables | CPI annual % change D7G7 at ONS Other measures of inflation (CPIH) CPI including owner occupiers’ housing costs – 2.6% (CPIH – L550) Factory gate prices (Output prices) 3.3% June 2017 (output prices) ONS See: Measures of inflation Cost push inflationary factors In 2017, UK has seen a…

Importance of exports to the economy

Importance of exports to the economy

Exports play an important role in the UK economy, influencing the level of economic growth, employment and the balance of payments. In the post-war period, lower transport costs, globalisation, economies of scale and reduced tariff barriers have all helped exports become a bigger share of national income. In 2011, exports of goods and services accounted for 19% of GDP (up from 14% in 1990). Imports accounted for 24% of GDP – indicating that we have a current account deficit. Importance of exports Employment. Growth in exports…

UK Government spending – real and as % of GDP

UK Government spending – real and as % of GDP

In 2015/16 the UK government is forecast to spend a total of £753 billion. Source: HMT public spending statistics (May 2017) Also see: HM Treasury PESA (released 21 July annually Real term trends in public spending Source: HMT public spending statistics (May 2017)    UK Pension spending More details on pension spending. Government spending as % of GDP

Keynesian economics

Keynesian economics

The essential element of Keynesian economics is the idea the macro economy can be in disequilibrium (recession) for a considerable time. Keynesian economics advocates government intervention to help overcome the lack of aggregate demand to reduce unemployment and increase growth. Theory behind Keynesian economics 1. If saving exceeds investment, we get a recession Classical theory suggested any fall in investment would lead to lower interest rates; this fall in interest rates would reduce saving, increase…

Difference between microeconomics and macroeconomics

Difference between microeconomics and macroeconomics

Readers Question: Could you differentiate between micro economics and macro economics? Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. Macro economics is the study of the whole economy. It looks at ‘aggregate’ variables, such as aggregate demand, national output and inflation. Micro economics is concerned with: Supply and demand in individual markets Individual consumer behaviour. e.g. Consumer choice theory Individual labour markets – e.g. demand for labour, wage…

Effect of lower interest rates

Effect of lower interest rates

A look at the economic effects of a cut in the Central Bank base rate. Summary: Lower interest rates make it cheaper to borrow. This tends to encourage spending and investment. This leads to higher aggregate demand (AD) and economic growth. This increase in AD may also cause inflationary pressures. In theory, lower interest rates will: Reduce the incentive to save. Lower interest rates give a smaller return from saving. This lower incentive to save will encourage consumers to spend rather than hold onto money. Cheaper borrowing costs. Lower interest rates make…

The UK Unemployment Mystery

The UK Unemployment Mystery

A feature of the 2008-12 recession, has been a largely unexpected fall in UK unemployment.  Unemployment has fallen much quicker than previous recessions. For example, after the much milder 1981 recession, UK unemployment rose to over 3 million (around 11%) and remained high well until the mid 1980s. After the 1991 recession, unemployment again rose sharply, to just over 3 million. Also, in Europe, unemployment has recently…