Q. How does the Bank of England decide and set interest rates? The Bank of England set the repo rate. This is sometimes known as the ‘base rate’. It is the interest rate at which commercial banks (like Lloyds and Natwest) borrow from the Bank of England. The Bank of England can control liquidity and …
Diminishing marginal utility of income and wealth suggests that as income increases, individuals gain a correspondingly smaller increase in satisfaction and happiness. In layman’s terms – “more money may not make you happy” Alfred Marshall popularised concepts of diminishing marginal utility in his Principles of Economics (1890) “The additional benefit a person derives from a …
Readers Question: What do you understand by the terms ‘monetary policy’ and ‘fiscal policy’? Explain with reference to a country of your choice:- a) How these policies have been used by the government to try to achieve its objectives Definition – monetary and fiscal policy Monetary policy is managed by the Bank of England. They have …
Looking at graphs for the saving ratio, I noticed a paradox. When people felt it was a good time to save more, they actually saved less. When people felt it was a bad time to save, they actually save more. Is it a Good Time to Save? As part of the GFK consumer confidence survey. …
A look at some problems and limitations of quantitative easing. Readers Question: I was wondering if anyone could help me with how Quantitative easing can possibly reduce a budget deficit? and what are the downsides of quantitative easing? The Bank of England has pursued a policy of quantitative easing. This has involved creating £275bn of …
Definition: Gross fixed capital formation is essentially net investment. It is a component of the Expenditure method of calculating GDP. To be more precise Gross fixed capital formation measures the net increase in fixed capital. Gross fixed capital formation includes spending on land improvements, (fences, ditches, drains, and so on) plant, machinery, and equipment purchases; …
The resource curse is the observation that countries endowed with a rich source of natural resources can struggle to make effective use of these and often end up with low levels of economic development than countries with low levels of natural resources. There are various reasons put forward to explain this resource curse, such as …
The UK government has given the Bank of England an inflation target of CPI 2 % +/-1. The Bank of England is responsible for using monetary policy (e.g. interest rates) to achieve this goal of low inflation. But, as well as targeting inflation, the Bank of England also has a wider remit of considering objectives …