Debt interest payments are the amount the government need to pay to holders of government bonds. It is the cost of servicing public sector debt.
In 2016/17 the OBR forecast £49.1bn – approx 2.5% of GDP
In 2017/18, the OBR forecast UK debt interest payments will be £55bn
The level of debt interest payments depends on:
Outstanding levels of government debt. In 2017, UK national debt was £1,737 billion equivalent to 86.5% of GDP.
Interest rates on debt. Bond yields can rise or fall depending on economic situation. In…
Excess consumption of sugar is linked to several health problems, such as obesity, diabetes, and tooth decay. Consumption of sugar imposes costs on individuals (lower life expectancy) and the rest of society (higher health care costs + lower productivity). A tax on sugar would discourage consumption and raise tax revenue to fund improved health care. Yet, critics argue that it is a regressive tax which takes more from those on low incomes.
Arguments for a sugar tax
1. External costs. Sugary drinks…
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.
Some jobs are seen as ‘demeaning’ or too tedious. For example, fruit picking/security guard.
Preferenc.e for ‘leisure’ (not working) over working.
Examples of Voluntary Unemployment
In the 1970s…
Structural unemployment is caused by a mismatch of skills between the unemployed and available jobs. Structural unemployed is caused by changes in the economy, such as deindustrialisation, which leaves some unemployed workers unable to find work in new industries with different skill requirements.
Structural unemployment occurs even during periods of strong economic growth. It is a form of supply side unemployment and not insufficient aggregate demand (AD). Policies to reduce structural unemployment include retraining and geographical subsidies. Fiscal or monetary policy to boost AD will be ineffective in solving structural…
In the past two decades, the UK has experienced a steady flow of net migrants into the economy. This net migration has had a wide-ranging impact on UK population, wages, productivity, economic growth and tax revenue. To what extent does net migration benefit the UK economy?
International Migration ONS
In 2016, Net long-term international migration was estimated to be +248,000 in 2016. Immigration was estimated to be 588,000 and emigration 339,000.
9,634…
Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand.
If aggregate demand (AD) rises faster than productive capacity (LRAS), then firms will respond by putting up prices, creating inflation.
Inflation – a sustained increase in the price level.
Demand-pull inflation – inflation caused by AD increasing faster than AS.
Demand-pull inflation means:
Excess demand and ‘too much money chasing too few goods.’
The economy is at full employment/full capacity.
The economy will be growing at a rate…
Readers Question: what are the pros and cons of price control?
Summary
Price controls can take the form of maximum and minimum prices. They are a way to regulate prices and set either above or below the market equilibrium:
Maximum prices can reduce the price of food to make it more affordable, but the drawback is a maximum price may lead to lower supply and a shortage.
Minimum prices can increase the price producers receive. They have been used in agriculture to increase farmers income. However, minimum prices lead to over-supply…
Transactional utility is a term to describe the happiness a consumer gets from the perceived value of the deal. ‘Transactional utility’ was developed by Richard Thaler and is said to be the difference between the actual price and your reference price – the price you expect to pay.
Example, Suppose you expect to pay $50 for a new coat. However, when you go into the shop, you find there is an unexpected sale of 20%. Therefore, the price you actually pay is $40. You gain the utility of buying the…
