Factor immobility occurs when it is difficult for factors of production (e.g. labour and capital) to move between different areas of the economy. Factor immobility could involve: Geographical immobility – When it is difficult to move from one geographical area to another. Occupational immobility – difficult to move from one type of work to another. …
Readers Question: Given the widely varying fiscal policies of countries, both left and right, how come their growth rates over the long term are so close? source: World Bank To some extent growth rates are close; though it also depends which data and countries you use. However, from a very broad perspective, growth rates do …
The J Curve effect a depreciation in the exchange rate can cause a deterioration of the current account in the short-term (because demand is inelastic). However, in the long-term, demand becomes more price elastic and therefore, the current account begins to improve. The J-Curve is related to the Marshall-Lerner condition, which states: If (PED x …
Readers question: What is Austerity? Simple definition of Austerity Austerity involves policies to reduce government spending (or higher taxes) in order to try and reduce government budget deficits – during a period of weak economic growth. Austerity policies are often associated with higher unemployment and lower economic growth. Austerity policies (and automatic stablisers) have reduced …
Definition: The Terms of Trade is the average price of exports / by the average price of imports. It is a measure of a countries relative competitiveness. If export prices rise relative to import prices, we say there has been an improvement in the terms of trade. – A unit of export buys relatively …
Summary Real business cycle models state that macroeconomic fluctuations in the economy can be largely explained by technological shocks and changes in productivity. These changes in technological growth affect the decisions of firms on investment and workers (labour supply). Hence changes in output can be traced to microeconomic and supply-side factors. Real business cycle models …
Evolutionary economics is a branch of economics which views the economy through a dynamic model of constant change, adaptation, chaos and revival. Evolutionary economics was coined by radical economist Thorstein Veblen (1857-1929). Veblen was interested in psychological factors that often gave better explanations for economic behaviour than traditional rational choice theory. For example, Veblen noted …
A look at the different factors affecting the price of oil in both short term and long. Readers Question: I’m trying to update myself on what’s happening with oil prices at the moment (partly to prepare myself for uni interviews) but I’m finding very conflicting articles, such as: Article warning of oil rising to $150 …