A lagging indicator is an economic statistic that tends to have a delayed reaction to a change in the economic cycle. A leading indicator is an economic statistic that tends to predict future changes in the economic cycle. A co-incident indicator is a variable that changes with the whole economy. The recession of 2008 was …
An economic downturn implies a fall in real GDP. A downturn also includes that period just before a recession – with a fall in the rate of economic growth and a widening output gap. A downturn will also include a period of negative economic growth and recession. An economic downturn is part of the economic …
Readers Question: Could you differentiate between micro economics and macro economics? Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. Macro economics is the study of the whole economy. It looks at ‘aggregate’ variables, such as …
Readers Questions Could you please explain the comparison between the Keynesianism & monetarism? Keynesianism emphasises the role that fiscal policy can play in stabilising the economy. In particular Keynesian theory suggests that higher government spending in a recession can help enable a quicker economic recovery. Keynesians say it is a mistake to wait for markets …
Fiscal Policy is the use of Government spending and taxation levels to influence the level of economic activity. In theory, fiscal policy can be used to prevent inflation and avoid recession. Fiscal Policy explained But, in practice, there are many limitations of using fiscal policy. Evaluation / Criticism of Fiscal Policy Disincentives of Tax Cuts. …
The accelerator effect examines the effect on levels of investment from a change in economic output (or demand for a product). The simple accelerator model suggests that capital investment is a function of output. If there is an increase in demand and economic output, investment will rise to meet the expected demand. The simple accelerator …
Saltwater economists are associated with economists from the Universities on the east and west coast of the US. In particular universities such as Berkeley, Harvard, MIT, Princeton, Pennsylvania Columbia and Yale. Economic thought from these universities tends to be more suspicious of free markets and advocate a greater role for government regulation and discretionary fiscal …
The great moderation refers to a period of economic stability characterised by low inflation, positive economic growth, and the belief that the boom and bust cycle had been overcome. In retrospect, economists look back on the great moderation in a different light because although inflation was low, there was great volatility in financial markets and …