Readers Question: When a country faces a recession, can they just increase the import taxes? so the country local production is increased to meet the demand and improve employment as well as the economy? It is an interesting question because often policymakers are tempted to pursue this as a strategy to boost domestic demand in …
Readers Question on the Euro – How would Euro be affected if the UK had been a member? Before the credit crisis and economic recession, I felt the Euro would be damaging to the UK economy. To summarise this was because: Lack of Independent monetary policy, e.g. interest rates set by the ECB may not …
Readers Question: If a progressive taxation is going to supposedly “reduce the gap between the rich and poor”, how and why does this happen? A progressive tax means that we take a higher % of tax from those on high incomes (e.g. a 50% income tax rate for income above £150,000). If everyone paid a …
Switzerland has many envious economic data. It has low unemployment, low inflation, low government borrowing (budget surplus in 2010). It’s total national debt is a mere 38% of GDP.It has one of the highest GDP per Capita’s in the world $42,600 (2010 est.) CIA Switzerland. Switzerland is a landlocked country and virtually no mineral resources. …
The European debt crisis raises many issues. Debt Levels Pre Crisis Public Sector debt as % of GDP Source: EU Stat In 2007, just before the financial crisis, European debt levels were relatively low by historical standards. Irish government debt was very low at around 27% of GDP. Spain was around 37% of GDP. UK …
Readers Question. You said that if Greece leaves the Euro, the Drachma will depreciate. Why will this happen? If Greece did leave the Euro, then the currency which replaced the Euro, would definitely fall in value. Greeks would soon see the price of imports increase. The foreign price of Greek exports would fall. If Greece …
Standard & Poor downgraded the US fiscal position from AAA to AA. This reflects the credit rating agencies believe that the US fiscal position has deteriorated and they are more pessimistic over long term fiscal consolidation in the US. It means that the rating agency feels the threat of US defaulting on its federal debt …
A two speed Europe refers to how, within the EU, economies are growing at different rates and are at different stages in the business cycle. For example, countries in the core of the Eurozone (Germany, Netherlands, France) have seen relatively good recovery since the recession. In these countries, unit labour costs have remained competitive, enabling …