Printing money creates a sense of nervousness amongst both economists and the general public. It immediately conjures up memories of hyperinflation in Weimar Germany in 1923 and Zimbabwe in more recent times. If a government prints money faster than the growth of real output it reduces the value of money and this invariably causes inflation. …
The polluter pays principle (PPP) is a basic economic idea that firms or consumers should pay for the cost of the negative externality they create. The polluter pays principle usually refers to environmental costs, but it could be extended to any external cost. In a purely free market, you would only face your private costs. …
Readers Question Q) evaluate the view that ‘trade-offs will be required over the period of the cycle’? In the economic cycle, there is often a trade-offs between different macroeconomic objectives. The main macroeconomic objectives include: Low inflation Higher economic growth Low unemployment Low current account deficit Low government borrowing Stable exchange rate. For example, if the …
Summary – If a country has a higher inflation rate than its competitors, then its good will be increasing in price at a faster rate and therefore, they will become relatively less competitive. It will experience less demand for its exports and therefore less demand for its currency. This will tend to cause a depreciation …
Readers Question: Does Government debt matter? Do high fiscal deficits threaten economic stability? Summary Many worry that high levels of government debt could cause economic instability. In certain occasions, countries with high debt have seen investors lose confidence, leading to higher bond yields and putting pressure on the government to slash spending, for example, several …
Deflation means a fall in prices (a negative inflation rate). Though policymakers should generally be concerned if there is an inflation rate less than the target of 2%. For example, in the Eurozone Jan 2015, the headline inflation rate is -0.2%. Even if we strip away volatile prices like oil, core inflation is 0.8%. …
A list of the major recessions in UK and US. List of Recessions in UK Comparing different recessions 1919-21 Recession GDP fell 25% during the three years following the end of the First World War. Unemployment rose to 20% UK experienced deflation of 10% in 1921, and 14% in 1922 Causes of fall in GDP …
Definition of the ‘Brain Drain’. The brain drain problem refers to the situation where a country loses its best workers. For example, skilled workers in developing countries such as India or Pakistan may be attracted by better rates of pay and working conditions in developed countries, such as the US and Western Europe. The brain …