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Why House Prices in the UK are Falling 2008

The state of the UK housing market seems to get as much coverage in the newspapers as just about every topic, bar the latest escapades of Britney Spears driving through a traffic light. From inches of press coverage, it appears that a fall in the rate of UK house price inflation is vastly more significant than a cyclone in Bangladesh, claiming the lives of 10,000 people. Anyway, the evidence does suggest the housing market is slowing down. With several reports showing a fall in house prices in recent months. The first…

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How Much Would You Pay for Cigarettes – $222?

When we buy a packet of cigarettes for $8, we may think that this is the personal cost. But, a new study claims the real personal and social cost of smoking a pack of cigarettes is closer to $200. pdf of report – Report by Kip Viscusi and Joni Hersch To arrive at these statistics they look at the likelyhood of early death from cigarettes. Smoking is generally assumed to reduce life expectancy by a number of years. However, smoking can also reduce quality of life, from an early…

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Recession In US and Euro Zone

How would a recession in the US and EU affect the UK economy? Over 75% of UK trade is with the US and EU. Therefore, a recession in these countries would have a significant impact. Firstly, UK exports to these countries would fall. Therefore, the UK is likely to have a fall in AD, (or at least lower growth) Therefore, the UK would experience a lower rate of economic growth. The impact of this fall in exports will depend upon several other factors. The impact will depend upon other factors affecting UK…

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Explaining Theories of Economic Growth

Readers Question: undertake an evaluation of what governments can learn from economic theory about raising their economies long-term growth rate? The long-term growth rate depends upon the underlying trend rate of economic growth rate. This underlying trend rate of growth depends primarily on the growth of aggregate supply and productivity. To increase the long term growth rate, Aggregate Demand plays a very limited role. In the Classical model of economic growth, an increase in AD would only cause inflation. However, you could argue that AD does have a role to play. If…

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Interest Rates to Fall in 2008

Yesterday, the Bank of England kept interest rates constant at 5.75% for the fourth consecutive month. However, it looks increasingly likely that the base rate will fall in 2008, possibly to 5%. Every three months the Bank publish an inflation report, which is a forecast for inflation over the next couple of years. Despite recent factors causing cost push inflation (oil prices, fuel prices) the outlook for inflation is forecast to be benign. The Bank predict that CPI inflation will be close to the government’s target of 2% by 2009. Other economic…

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The Effects of Protectionism on UK Economy

Readers Question: what are the possible consequences/effects of protectionism with regard to the UK and the rest of the world? Protectionism involves placing tariffs and other barriers to trade. If there is a rise in protectionism we will experience a reduction in trade between the UK and the rest of the world. It is argued that if trade falls the UK will lose out on many benefits such as:Exporters will see a fall in demand, causing less output and possibly unemployment Consumers will have to pay higher prices for imports of…

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Preparing for Economics Interview at Oxford

Readers Question: what do I need for an interview of “Economics and Management” course or PPE course in Oxford ? I have written one article here with some general advice for preparing for an interview at Oxford For Economics and Managemanent or PPE. I would suggest the additional pieces of information 1. Read Outside Syllabus Make sure you have read, at least, a couple of economics books which go beyond the A Level syllabus. This might be the popular Freakonomics, or something by Paul Krugman . There is no guarantee that…

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The Role of Aggregate Demand in Reducing unemployment

Evaluate the importance of managing aggregate demand to bring about a sustained reduction in the rate of unemployment in the UK economy. In 1992 Unemployment in the UK rose to 3 million, a lot of this was due to the recession of 1992. In a recession, demand deficient unemployment will increase. This is because as firms close down they have to lay off workers. Therefore, in this case, it is important for the government to try and boost AD and increase the rate of economic growth. For example, the government could…