Does economic growth conflict with the objective of the balance of payments stability? UK economic growth and current account balance Both economic growth and balance of payments are macroeconomic objectives. Economic growth is an increase in real GDP – leading to higher living standards. Balance of payments stability refers to a sustainable or limited current …
What factors enable a firm to grow in size? Internal expansion When a firm increases size through increasing production and sales. External expansion – When the firm grows through a merger with another firm. Internal expansion can involve Cutting price to increase sales and gain more market share. This may make the firm less profitable …
Readers Question What does the size of a current account deficit / surplus say about the state of the economy? A current account deficit means that the value of goods and services imported is greater than the value of exports. A current account deficit requires capital / financial flows to finance this deficit. Despite the …
Government price controls are situations where the government sets prices for particular goods and services. Types of price controls Minimum prices – Prices can’t be set lower (but can be set above) Maximum price – Limit to how much prices can be raised (e.g. market rent) Buffer stocks – Where government keep prices within a certain …
A recession is a period of negative economic growth – a fall in output accompanied by rising unemployment. Recessions tend to occur in cycles of 8-10 years, though there is no hard and fast rule. Attempting to predict a recession by the number of years is not guaranteed to work. Recessions in UK Source: ONS …
The savings ratio a big determinant of economic activity. Consumer spending accounts for 63% of GDP – dwarfing other areas, such as government spending, investment and exports. A rise in the savings ratio can have a very significant impact on economic activity. A blogger, mentioned a minister, Liam Fox calling for more savings. Former cabinet …
Profit is the surplus revenue after a firm has paid all its costs. Profit can be seen as the monetary reward to shareholders and owners of a business. In a capitalist economy, profit plays an important role in creating incentives for business and entrepreneurs. For an incumbent firm, the reward of higher profit will encourage …
A look at the benefits and costs of capital flows.