Readers Question: I have a hunch that Keynesian responses to recession work best in industrial countries such as China and 1930’s USA as opposed to post industrial societies such as the US and UK. In the great depression consumption and production were, generally, in the same countries, e.g. cars produced in America would be consumed …
Readers Question From why inflation makes it easier to pay government debt 1. Why will wages increase with inflation? There is no law that inflation will automatically lead to higher nominal wages. It is possible for inflation to be higher than the nominal wage growth. In this case, workers see a fall in real wages …
Readers Question: How likely are we to go into a double dip recession? There are many reasons to be gloomy about the current global economic prospects. A technical recession involves two consecutive quarters of negative economic growth. We may avoid this actual fall in GDP, but we will definitely experience below trend economic growth – …
Readers Question. You said that if Greece leaves the Euro, the Drachma will depreciate. Why will this happen? If Greece did leave the Euro, then the currency which replaced the Euro, would definitely fall in value. Greeks would soon see the price of imports increase. The foreign price of Greek exports would fall. If Greece …
Standard & Poor downgraded the US fiscal position from AAA to AA. This reflects the credit rating agencies believe that the US fiscal position has deteriorated and they are more pessimistic over long term fiscal consolidation in the US. It means that the rating agency feels the threat of US defaulting on its federal debt …
Readers Question: What is Canada’s National debt? It is a little hard to decipher as there seem to be two different measures. Net Federal Debt – NetDebt owned by federal government Gross General Government Debt The second statistic – Gross General Government debt includes debt by local and state governments and so gives a higher …
Readers Question: What would happen if India was the only exporter of gold? India would have a monopoly in the export of gold. Given the recent increase in the price of gold, this would lead to a significant increase in foreign exchange earnings for India. If the export of gold was controlled by India, it …
The Net international investment Position (IIP) measures the balance of gross assets – gross liabilities. An asset means the UK has a claim on the rest of the world. A liability means the rest of the world has a claim on the UK. There are 4 sections of net international investment. direct investment (DI) portfolio …