The current US administration is proposing tax cuts which ‘The Committee for a Responsible Federal Budget’, estimates it will include $5.8 trillion of total tax cuts over the decade and a net cost of $2.2 trillion through 2027. The problem with these tax cuts It is unclear how these tax cuts will be financed. An …
Nearly all economists advise keeping inflation low. Low inflation contributes towards economic stability – which encourages saving, investment, economic growth, and helps maintain international competitiveness. Governments usually target an inflation rate of around 2%. This moderate but low rate of inflation is considered the best compromise between avoiding the costs of inflation but also avoiding …
Say’s law states that the production of goods creates its own demand. In 1803, John Baptiste Say explained his theory. “It is worthwhile to remark that a product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value.” (J. B. Say, 1803: …
Readers Question: What is the cause of deflation? Deflation involves a fall in the price level – a negative rate of inflation. From a very basic standpoint, there are two main potential causes of deflation: A fall in aggregate demand (AD) A shift to the right of aggregate supply (AS) – i.e. lower costs of …
Eurobonds are a way for countries to borrow as one entity. For example, there would just be a single European bond to finance the net debt of all the individual Eurozone member countries. It would mean that the bond would be seen as a safe investment and therefore would have a low interest rate cost. …
A recession is defined as a decline in real GDP for two consecutive quarters. An economy is in an official recession after six months of falling national income. A recession will typically lead to higher unemployment, a decline in confidence, falling house prices, decline in investment and lower inflation. However, although that may seem quite …
A look at the pros and cons of austerity (government spending cuts). Is austerity a way to solve economic problems, or does it merely lead to a deeper recession and lower tax revenues.