A tortoise economy refers to an economy that is barely growing – either economic growth is stagnant or growth is very slow. In particular, it has been used to describe a sluggish recovery from recession. In the aftermath of the great recession – 2007/08, many western economies experienced a very slow economic recovery. GDP was …
Readers Question: In 2008, did banks lend money to people who wanted to buy a house because they believed that the value of the housing market would keep rising? So even if people defaulted on their loan repayments then the banks could reposes the house as it was used as collateral. As the value of …
Definition: Shrinkflation occurs when firms reduce the size or quantity of a good and keep prices the same. Shrinkflation is an alternative to increasing prices, and you could argue it is a disguised form of inflation because if you wanted to buy exactly the same quantity of the good, you would have to spend relatively …
Economic growth is an increase in national output/income (higher real GDP). There are two main aspects of economic growth: Aggregate demand (AD) (consumer spending, investment levels, government spending, exports-imports) Aggregate supply (AS) (Productive capacity, the efficiency of economy, labour productivity) To increase economic growth We need to see a rise in demand and/or an increase …
A look at how a Central Bank may act as lender of last resort to commercial banks and the government. A lender of last resort means if banks or the government are short of funds, the Central Bank will step into prevent illiquidity. This helps to maintain confidence in the banking sector. Lender of last …
A competitive market implies many firms and a freedom of entry and exit and many firms seeking to attract customers. On the one hand, competitive markets will create an incentive for firms to develop new and better products. However, the lack of supernormal profit may make investment in research and development difficult. How competitive markets …
Economic growth means an increase in real GDP – this leads to higher output and higher average incomes. Governments often try to increase the growth rate because it will have various advantages. These include Benefits of economic growth Increased consumption. Firstly, higher GDP implies the economy is producing more goods and services and therefore consumers …
Summary: Cardinal utility gives a value of utility to different options. Ordinal utility just ranks in terms of preference. Cardinal Utility is the idea that economic welfare can be directly observable and be given a value. For example, people may be able to express the utility that consumption gives for certain goods. For example, if …