As output falls, you would expect a rise in unemployment. If output is lower, firms will need less workers. Okun’s law is a look at the relationship between falling output and rising unemployment. As a rough rule of thumb, in Okun’s original statement of his law, he found a 3% increase in output corresponded to …
Readers Question: Why do the Government often fail to achieve its main objectives of high economic growth, price stability, and a surplus on the balance of payments. Other objectives worth adding are low unemployment, low government borrowing and maybe stable exchange rate. Looking at the current climate of the UK economy, the government is only …
The US dollar surprised many people by retaining its value for a long period during this economic crisis. Despite, 0% interest rates, increasing government debt, and a current account deficit, many were still buying the dollar as it was perceived as ‘relatively safe’ However, the recent plan by US treasury to buy even more assets …
There is an oft repeated quote: “A recession is when you’re neighbour loses his job. A depression is when you lose your job. “ It is one thing to write about recessions, but, when you see job lay offs near where you live and when you hear about friends who are without work, it makes …
Readers Question: How can a smaller government fiscal deficit cause a larger international trade surplus? A smaller fiscal deficit means the government is reducing its borrowing. Therefore tax revenues must be increasing faster than government spending. A trade surplus means that the value of exports is greater than the value of imports. Suppose the government …
Why is monetary policy easier to conduct than fiscal policy in a highly divided national political environment? Monetary policy is usually implemented by independent monetary authorities. For example, in UK, monetary policy is implemented by the Monetary Policy Committee of the Bank of England. Therefore, they can take politically unpopular decisions such as increasing interest …
National Statistics online has had a well overdue make over. The new web design takes up the whole screen and is easier to navigate and read. It also comes with RSS feed which is useful For any economist, National Statistics Online is a very useful resource for finding latest data and statistics and understanding some …
Readers Question: This one is about flexibility in the labour market. I am wondering why globalisation has made a contribution to the increase in flexibility. Is it because firms face fierce competition so they have to hire workers only when they need them? Increased competition is certainly one factor. If a firm has a domestic …