The aggregate supply curve shows the total supply in an economy at different price levels. Generally, the aggregate supply curve slopes upwards – a higher price level encourages firms to supply more. However, there are different possible slopes for the aggregate supply curve. It could be highly inelastic (vertical) to very elastic. It is important …
Readers Question: Does job creation come from public or private sector? The public sector is government (national and local). Public sector jobs include doctors, police, teachers and civil servants. The private sector is private enterprises – retail, manufacturing, local services. Public sector jobs as a share of total employment UK 23.5% (2013) US 14.6% (2008) …
The US has recently placed tariffs on Chinese imports and is threatening to further increase tariffs in the next few weeks. The effect of these tariffs is to increase domestic prices, provide some benefits to domestic producers, but also cause costs to US exporters. There is a strong risk that these tariffs will cause loss …
Investment influences the rate of economic growth because it is a component of aggregate demand (AD) and more importantly influences the productive capacity of the economy. (LRAS) An increase in investment should be a boost to economic growth. Readers Question: Discuss the importance of investment in increasing economic growth. Investment means expenditure on capital spending, …
The concept of hidden taxes is that taxpayers may remain unaware that they are paying the tax because it is included in the price and the tax is not visible. Examples of hidden taxes include Indirect taxes – VAT, sales tax, excise duty, Insurance tax, air passenger duty. Corporation tax – a tax on company …
Readers Question: What is the paradox of deleveraging? It refers to a situation where everyone is trying to reduce debts and improve their balance sheets all at once; but this process of paying off debts creates problems for the economy – such as a shortage of liquidity and fall in consumer spending.. From a personal …
Price elasticity of demand measures the responsiveness of demand to a change in price. Price inelastic – a change in price causes a smaller % change in demand. Price elastic – a change in price causes a bigger % change in demand. Price inelastic demand We say a good is price inelastic, when an increase …
Readers Question: How much are US economic policies are responsible for its current account deficit? At one stage, the US current account deficit reached 6.5% of GDP, which was one of the highest in the industrialised world. Since the early 1980s, the US has been running a persistent current account deficit. Reasons for the US …