A fixed exchange rate occurs when a country keeps the value of its currency at a certain level against another currency. Often countries join a semi-fixed exchange rate, where the currency can fluctuate within a small target level. For example, the European Exchange Rate Mechanism ERM was a semi-fixed exchange rate system. Summary The idea …
Gary Becker (1930 – 2014) was an American economist who helped to spread economics into fields of social science, such as sociology, demography and criminology. Becker undertook economic analysis in areas such as racial discrimination, the incentives of crime, drug addiction and family relationships. Becker also helped to popularise and develop the concept of human …
The tax burden refers to the share of GDP that is collected in different forms of tax within an economy. For example, in an economy with a size of £1,000bn – if the government collects tax of £300bn, then the tax burden will be 30%. The tax burden gives a strong guide to the extent …
Does economic growth conflict with the objective of the balance of payments stability? UK economic growth and current account balance Both economic growth and balance of payments are macroeconomic objectives. Economic growth is an increase in real GDP – leading to higher living standards. Balance of payments stability refers to a sustainable or limited current …
Taxation on goods, income or wealth influence economic behaviour and the distribution of resources. For example, higher taxes on carbon emissions will increase cost for producers, reduce demand and shift demand towards alternatives. Higher income tax can enable a redistribution of income within society, but may have an impact on reducing the incentives to work …
There are different ways for the government to raise tax revenue. While tax is often unpopular, economists set criteria for what makes a ‘good’ and ‘fair’ tax. This includes – fairness, easy to collect, non-distortionary and increases social welfare. Principles of a good tax include Vertical equity – Fair. Vertical equity is concerned with setting …
Definition of the underground economy. The underground economy involves economic transactions not measured by government statistics and ignoring government regulations and laws. It includes Illegal criminal activity Non-market activity – e.g. growing your own vegetables Legal activity which is hidden from authorities (e.g. to avoid paying tax) The underground economy may also be referred to …
Living standards vary significantly across the globe. Wealthy economies, such as the US have an average GDP per head (at PPP) of $59,495 in the US (IMF 2017) This compares to an average annual income as low as $808 Burundi. (IMF 2017) There are many reasons for these divergences in income including – historical trends, …