Economics help blog – Page 254

Why is the UK Housing Market is an obstacle to joining the Euro?

1 February 202026 May 2008 by Tejvan Pettinger

Readers Question: ‘Outline two reasons why the UK’s housing market represents a barrier to the UK’s membership of the euro’.

Joining the Euro involves a common monetary policy. This means that UK interest rates will be set by the ECB. Therefore, if the ECB has to increase interest rates it will increase UK rates and therefore increase the cost for UK homeowners. If interest rates increase at the wrong time it could cause economic hardship for homeowners.

1. Mortgages are a high % of consumer’s disposable income and therefore are sensitive to changes in interest rates. UK House prices are a high ratio of average incomes. Many homeowners have had to take out mortgages 4-5 average incomes to get on the property ladder. This means mortgage payments are a high % of disposable income. If interest rates increase, it could make mortgages unaffordable.

Male Inactivity Rates in UK 2008

20 February 202026 May 2008 by Tejvan Pettinger

Readers Question ‘Evaluate two policies which the government might adopt to reduce the male inactivity rate’

Main Reasons for Inactivity in Labour Market

Inactivity rates imply that people have left the labour market and are not able or are unwilling to seek employment. According to the ONS, inactivity rates can be caused by:

Being a student
Looking after family/home
temporary sickness
long-term sickness
Discouraged
Retired (early)
Other

Source: ONS (nov, 2011)

Policies To Reduce Inactivity Rates

1. Make It more difficult to gain sickness / long term disability benefits. It is argued that it has become too easy for the long term unemployed to be given sickness benefits. The government could introduce a scheme where those on benefits are revaluated every 12 months and given the option to take on light work. This could help reintegrate them into the labour market.

Forecast for the Euro in 2008 and beyond

23 May 2008 by Tejvan Pettinger

It is easy to forget, but, only 5 years ago people were talking about the Euro as if it was doomed to fail. 1 Euro got you 86 cents. 5 years later and 1 Euro is worth $1.48 and people are suggesting the Euro is set to be the next global reserve currency. The Euro’s …

Definition Research & Development and Innovation

16 January 202023 May 2008 by Tejvan Pettinger

Readers Question: It’s not a good question, but I’ll ask it. Could you explain the differences between Research and Development and innovation? Research and Development involves investment in discovering new technology and increasing capacity of a firm. It could involve technological innovation or improvements in human capital. It usually requires a willingness to forego current …

Revision Tips for A Level Exams

10 March 202023 May 2008 by Tejvan Pettinger

In the UK, it is currently the exam season and my students are finally thinking of doing some actual revision. These are some tips to make your revision more effective. Be practical. Don’t worry over results or speculate on grades, make small efforts to improve knowledge and exam writing technique. If you make those small …

Oil Price Predictions 2008

16 September 201323 May 2008 by Tejvan Pettinger

The price of oil reached another record high yesterday – $125 Brent Crude oil reached $126 US light crude oil reached $128 before setting back to $127 This means that, even adjusted for inflation, oil is now close to the all time high, last reached in the 1970s. What are the reasons behind the Recent …

What Factors Would Stop the Dollar Devaluing?

16 January 202022 May 2008 by Tejvan Pettinger

Readers Question: What would stop the falling dollar?

The dollar has been falling for many reasons. These are some of the factors which would stop the dollar falling and lead to a recovery in the value of the dollar.

Higher Interest rates. US interest rates have been cut to 0% in an effort to stave off a US recession. This causes an outflow of hot money. If interest rates were raised it would encourage people to save in the US and cause an appreciation.

Recovery in US economy. The US fear recession because of a declining housing market, this is leading to lower interest rates and lower confidence about the US economy. If the economy recovered, interest rates would increase and people would have more confidence in buying dollars.

Fears Over the Euro. The main beneficiary of the falling dollar has been the Euro. People are increasingly seeing the Euro as an alternative reserve currency to the dollar. Therefore, investors have been switching out of the Dollar. However, confidence in the Euro may be misplaced. The Euro economy is not much stronger than the US. Many European economies face the prospect of falling house prices; also the strength of the Euro is causing problems for exporters. Arguably, the Euro is overvalued on economic fundamentals – the dollar looks cheap on purchasing power parity. Maybe the sell off of dollars has been overdone.

Why does greater wealth lead to less marriage?

1 February 202019 May 2008 by Tejvan Pettinger

There is a report in the Times today, suggesting that young people can’t afford marriage – Marriage too expensive But, on the face of it, it is absurd. When people were really poor 100 years ago, marriage rates were much higher. Despite what people may think, living standards have been gradually rising for the past …