An explanation of what happens if there are net outflows of money from a country. Impact on: Real GDP (tends to fall) Employment Exchange rate – exchange rate will fall Balance of Payments – debit on financial account Confidence – if big outflows it can cause a negative spiral of declining confidence. Government debt – …
Readers Question: my question is whether economic instability means high and fluctuated inflation, employment and unsustainable growth or has other definition? Economic instability can take various forms. In recent years, we have witnessed a few examples of this. The main types of instability are: Inflation – The cost-push inflation of the 1970s. In extreme cases, …
Definition of Gross Gross is the total amount exclusive of deductions. For example, gross pay, is the total pay before tax deductions Definition of Net Net is the total amount received after subtracting deductions from the gross amount Difference between gross and net interest rates Gross interest rate is the headline interest advertised by a …
Readers Question: From: How Does the Stock Market Affect the Economy I want to know the basic principle behind the working of share market? What is the profit, company is getting from shares? Does the downfall in share price affect the overall performance of the company? Basic Principles of Stock Market Companies list shares on …
Eurobonds are a way for countries to borrow as one entity. For example, there would just be a single European bond to finance the net debt of all the individual Eurozone member countries. It would mean that the bond would be seen as a safe investment and therefore would have a low interest rate cost. …
Readers Question: What are the effects of increased investment on aggregate demand in the short term and the long term. Investment means capital expenditure (e.g. purchasing machines or building bigger factory) Investment is a component of AD – AD+ C+I+G+X-M. Investment spending takes about 15% of AD; it is not as significant as consumer spending …
Voluntary unemployment is defined as a situation where the unemployed choose not to accept a job at the going wage rate. Reasons for voluntary unemployment Generous unemployment benefits, which make accepting a job less attractive. High marginal tax rates, which reduce effective take home pay. Unemployed hoping to find a job more suited to skills/qualifications. …
The real interest rate is the nominal interest rate – inflation rate. For example, if the Bank of England set base rates of 5.5% and the CPI inflation rate is 3.4%. Then the real interest rates is said to be 2.1% A higher real interest rate is good for savers and bad for borrowers. Note, …