A-Level

Keynesian economics

Keynesian economics

The essential element of Keynesian economics is the idea the macroeconomy can be in disequilibrium (recession) for a considerable time. Keynesian economics advocates higher government spending (financed by government borrowing) to help recover from a recession. Keynesian economics includes Disequilibrium in macro economy (insufficient demand) Imperfect labour markets (e.g. Sticky wages) Paradox of thrift (in recession, individuals save more, but this worsens the economic downturn Liquidity trap. When low-interest rates fail to boost…

Key measures of economic performance

Key measures of economic performance

Traditionally, the key measures of economic performance in macroeconomics include: Economic growth – real GDP growth. Inflation – e.g. target CPI inflation of 2% Unemployment – target of full employment Current account – satisfactory current account, e.g. low deficit. Other measures of economic performance can include: Government borrowing/national debt Real disposable incomes Income inequality (Gini coefficient) Labour productivity Investment levels Exchange rate Measures of well-being – surveys which measure overall living standards. e.g. ONS well-being index. Human development index (HDI) – a measure of economic development. It is a…

UK Inflation Rate and Graphs

UK Inflation Rate and Graphs

Current UK Inflation Rate CPI inflation rate:  3.1% (headline rate) CPI – D7G7 at ONS (page updated 17 Dec 2017) Source: Raw data General inflation tables | CPI annual % change D7G7 at ONS Other measures of inflation (CPIH) CPI including owner occupiers’ housing costs – 2.8% (CPIH – L550) RPI – 3.9% (Nov 2017) Factory gate prices (Output prices) 3.3% June 2017 (output prices) ONS See: Measures of inflation Cost-push inflationary factors In 2017, UK has…

UK unemployment-rate

UK Unemployment Stats and Graphs

A selection of graphs and statistics on UK unemployment. Also, looking at factors that explain UK unemployment and why unemployment has fallen in recent years. Raw data:  Labour market data | Source: ONS MGSX (LFS) Current UK Unemployment rate Unemployment rate of 4.3%, (Oct 2017) –  (UK Unemployment at ONS) 1.45 million unemployed people. (ONS) Employment rates Employment rate: 75.3% (proportion of people aged 16-64 in work) – ONS Employment:  32.136 million people in work. Participation…

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…

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

economies-of-scale-growth-in-firm

Discuss why firms grow in size

Most firms seek to become bigger – increasing sales and market share. Firms can grow through internal expansion, external growth (merger) or diversification into related industries. The motives for increasing in size can include: Greater sales lead to greater profit, making the firm more attractive to shareholders Successful, growing firms are likely to increase salaries/pay bonuses to managers. Increasing output enables economies of scale, greater efficiency and lower average costs. Increased prestige for managers seeing the firm become more influential and powerful. Greater risk diversification, e.g. when growth comes…