GDP per capita is a measure of average income per person in a country.
Interest rates have a strong influence on house prices, principally because changes in the interest rate affect the cost of mortgage payments.
When interest rates were increased 1988-92, mortgage interest payment rose rapidly.
The rise in mortgage payments and rise in home repossessions of 1991/92 led to a rapid fall in house prices.
UK base rates
High interest rates caused house price fall in 1990.
However, the fall in 2008/09 – was not due to interest rates, but due to global credit crunch and recession.
Evaluation
Interesting article here about the UK economy of the 1930s escaping from the Liquidity trap and Great Depression of the 1930s. This involved: Higher inflation target Low-interest rates and negative real interest rates. Devaluation (UK left Gold Standard in 1931) The article is also interesting for another reason, a short insight into the housing market …
A bond is a type of debt instrument. It is a way for a company or government to raise money by selling, in effect, IOUs – with annual interest payments. A loan is also a debt instrument, usually provided by a private bank with a variable interest rate. They are both methods of borrowing money, …
If you are preparing for your A Level exams in June, you should be making use of past papers, and if possible mark schemes as well. Using past exam papers is one of the most effective ways to revise and prepare for an exam. It is the most focused way of working what you know …
Readers Question: Evaluate the case for raising the legal drinking age to 21. Will it be more effective than other methods for reducing the harmful effects of alcohol? There are several reasons to be concerned about the over-consumption of alcohol, especially amongst young people. In the UK, abuse of alcohol has contributed to several social, …
A credit rating is a judgement made on the security of government bonds. They are made by credit rating agencies who evaluate several factors and decide on their likelihood of default. A triple-A credit rating implies the bond is secure. A junk bond status implies the government is likely to default. Readers Question: Hello, I …
Diagrams showing how shifts in aggregate demand (AD) and aggregate supply (AS) affect macroeconomic equilibrium – real GDP and price level (PL)
Includes short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) and classical and Keynesian view of LRAS curves.
This shows an increase in AD when the economy is close to full capacity, causing a significant rise in price level.
