Readers Question: What are the benefits of “supply-side” economics, particularly for the working class, the middle-class if you will? Supply-side policies encompass a range of different policies that seek to reduce tax rates and government intervention in the economy. In the US, supply-side economics has become synonymous with the Laffer Curve theory and the Reagan …
In economics, gravity theory relates to how international trade between countries is influenced by Geographical proximity Economic size (mass) of the respective countries (M) Similarities in consumer preferences and economic development The gravity theory of trade suggests, ceteris paribus, an economy will gravitate towards trading with its closest neighbours and economies which are similar in …
An explanation of what happens if there are net outflows of money from a country. Impact on: Real GDP (tends to fall) Employment Exchange rate – exchange rate will fall Balance of Payments – debit on financial account Confidence – if big outflows it can cause a negative spiral of declining confidence. Government debt – …
The 1980s was a period of economic volatility. There was a deep recession in 1981 as the government tried to control inflation. The recession particularly hit manufacturing causing unemployment to rise to over 3 million. Unemployment did not fall until the mid and late 1980s when the economy boomed during the “Yuppie-years” of rising wages, …
The essence of profitability is a firms Revenue – Costs with revenue depending upon price and quantity of the good sold. These factors will all determine the profitability of firms 1. The degree of competition a firm faces. If a firm has monopoly power then it has little competition. Therefore demand will be more inelastic. …
Readers Question: Explain what is meant by a balance of payments disequilibrium? The Balance of Payments is comprised of two main components: The Current Account (trade in goods, services + transfer payments and investment incomes) The Financial Account (used to be called capital account; this is capital flows such as foreign direct investment) If the …
Readers Question: Interest Rates are increased by the governments to bring down inflation rates, this makes exports price competitive as well, as a result, exports increase. However, an increase in interest rates can lead to an appreciation of the currency as demand for the currency increases. So this again increases the price of exports as …
During the years 1997-2007, there was a significant rise in government spending, though as a % of GDP the rise was less marked. Source: ONS Public Sector Finances MF6U – October 2014 Government spending as a % of GDP A more meaningful comparison is to look at the share of government spending as a % …