Readers Question: How Long do Recessions last? There is no exact answer. Recessions can last for varying time lengths depending on the causes and also the response of governments and consumers. If recessions are caused by a tightening of monetary policy (higher interest rates to reduce inflation), then it tends to be easier to get …
The economic cycle plays an important role in determining the level of government borrowing, especially in the short run. Essentially, higher economic growth leads to lower government borrowing, but a recession will increase government borrowing. Over the past few years (2008-12) – the idea that an economic downturn increases government borrowing is probably one of …
Readers Question: Can you explain the short-term and long-term effects of Osborne legislating that there must be budget surpluses in any year when growth exceeds 1%, which is almost every year, whilst we have a rather large current account deficit. What will be the effects of this on private sector companies, public investment, households, the …
Readers Question: How can a developing country grow without inflation? Economic growth can lead to inflation, for example, if demand rises faster than productive capacity, then we will see rising prices. However, economic growth is compatible with low inflation, and developing economies which can increase productive capacity and general efficiency can see rising living standards …
The money supply is the amount of money in circulation measured by narrow money (MO) and broad money (M4). The money supply can rise if Central Banks print more money. Banks choose to hold a lower liquidity ratio. This means banks will be willing to lend a larger proportion of their funds. An inflow of …
Economists attempt to make forecasts for leading economic variables such as Inflation Economic growth House prices Exchange rates Population growth The main importance of economic forecasts is to help policymakers make better decisions. For example, if the economy was forecast to enter into a recession, the government could consider implementing expansionary fiscal policy (higher spending …
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