Economics help blog – Page 36

Real wages definition

5 July 202215 May 2022 by Tejvan Pettinger

Definition Real wages show the value of wages adjusted for inflation. Real wages are a guide to how living standards have changed. For example, if nominal (actual) wages increased 5%, but inflation was 5%. This would mean the purchasing power of your wages had stayed the same. The net effect would be the same as …

Pros and cons of Immigration

11 July 202214 May 2022 by Tejvan Pettinger

Immigration can give substantial economic benefits – a more flexible labour market, greater skills base, increased demand and a greater diversity of innovation. However, immigration is also controversial. It is argued immigration can cause issues of overcrowding, congestion, and extra pressure on public services. There is also a debate about whether immigration of unskilled workers …

Difficult choices of a Central Bank in dealing with Stagflation

12 May 2022 by Tejvan Pettinger

The UK like Europe and the US is facing an unwelcome return of stagflation – a period of higher inflation and lower growth. In March 2022, UK GDP fell 0.1%, yet at the same time, inflation has jumped to 7% with forecasts of 10% inflation by the end of the year. The Bank of England …

Does a lower budget deficit lead to lower interest rates?

17 June 202211 May 2022 by Tejvan Pettinger

Readers question: Keeping a lower deficit of the National Budget would benefit Americans as interest rates would remain stable and allow new businesses to grow. Would you say this statement is correct? In theory, there is an argument that a rising deficit can cause a rise in bond yields and interest rates. Similarly, there is …

Why are UK house prices so high?

17 July 202210 May 2022 by Tejvan Pettinger

In recent years, we have had a devastating global credit crunch, the longest and deepest recession since the 1930s and then the impact of Covid. Yet, despite this financial and economic upheaval, UK house prices have bucked the trend, avoided a major collapse and now exceeded pre-crash levels. The economics of Covid have even made …

History of Inflation in UK

12 June 20221 May 2022 by Tejvan Pettinger

The UK has avoided any situation of hyperinflation. The highest rates of inflation were after the Napoleonic War in the early nineteenth century. During the First World war (25%) and in the 1970s where inflation rose due to a rise in oil prices and strong wage growth.

After the late 1980s inflation was brought under control, inflation remained for nearly two decades – during a period known as the great moderation. However since 2008 we have seen periods of cost-push inflation, most notably in 2022, with inflation rising close to 10% due to rising oil, gas and food prices.

Inflation means an increase in the general price level and has the effect of reducing the value of money. Rising prices mean money buys less than it used to. See: Definition of Inflation

Inflation since 1860

historical-inflation-1860

Inflation 1949-2015

How the housing market affects the economy

25 February 202324 April 2022 by Tejvan Pettinger

A look at how the housing market and changes in house prices affect the rest of the economy. In summary: Rising house prices, generally encourage consumer spending and lead to higher economic growth – due to the wealth effect. A sharp drop in house prices adversely affects consumer confidence, and construction and leads to lower …

Historical UK national debt

11 July 202217 April 2022 by Tejvan Pettinger

Click to enlarge National debt (public sector debt) is the total amount of liabilities the government owe to the private sector (plus liabilities held by Central Bank). National debt is typically bought by domestic private sector (banks, insurance funds, pension funds) and foreign investors (foreign banks) Recently some has been bought by the Bank of …