Equilibrium national income occurs where aggregate supply equals aggregate demand. An increase in equilibrium national income requires an increase in long-run aggregate supply and aggregate demand. Equilibrium national income and Keynesian Consumption function We can also show equilibrium national income using a Keynesian consumption function. In this case, an increase in domestic aggregate demand (C+I+G) …
Graph showing Ratio of House prices to Incomes This graph shows an interesting increase in the ratio of house prices to income. It is well know that UK house prices have increased significantly since 1993. In some areas the house price increase has been at least 300%, since the early 1990s. However, since 1998, house …
Readers Question: Does mortgage equity withdrawal enhance economic growth? There is good evidence that mortgage equity withdrawal can lead to higher levels of consumer spending and economic growth Definition of Mortgage equity withdrawal – Mortgage equity withdrawal occurs when homeowners remortgage taking out bigger loans to take advantage of rising property values. Suppose you bought …
About £77 billion was wiped from the value of leading FTSE 100 companies over fears of a US recession. The FTSE 100 index is now down to its lowest level in 19 months. In particular, stock markets were unimpressed by President Bush’s plan for tax cuts. In American politics tax cuts are often seen as …
Sticky inflation is an undesirable economic situation where there is a combination of stubbornly high inflation, (and often stagnant growth). Sticky inflation is often associated with cost-push factors, i.e. factors which cause a rise in the inflation rate but also lead to lower spending and economic growth. Sticky inflation is also sometimes known as Stagflation …
Readers Question: What will happen if OPEC continued to increase oil prices? Firstly, the rise in the price of oil is not just due to the activities of OPEC. It is partly due to the rising demand from countries such as China. If OPEC continue to contribute to higher oil prices in 2008 it would …
Indian Economy 2009 Behind China, India is the second fastest growing economy. According to a survey by Goldman Sachs, India will become the 3rd largest economy by 2035. This is measured in $US. If we use PPP (purchasing power parity) which takes into account local purchasing power, India already has the 3rd largest economy. However, …
Readers Question: What is the most important reason why there is an improvement in the economic growth in the chinese out of the following policies. is it Government policy, education, investment from overseas, cheap labour or natural resources. 1. Cheap Labour China has a large unskilled workforce willing to work for low wages. In the …