Readers question: what are the advantages and disadvantages of devaluation? Devaluation is the decision to reduce the value of a currency in a fixed exchange rate. A devaluation means that the value of the currency falls. Domestic residents will find imports and foreign travel more expensive. However domestic exports will benefit from their exports becoming …
A recession is a period of negative economic growth. In a recession, we see falling real GDP, falling average incomes and rising unemployment. This graph shows US economic growth 2001-2016. The period 2008-09 shows the deep recession, where real GDP fell sharply. Other things we are likely to see in a recession 1. Unemployment The …
A current account deficit occurs when the value of imports (of goods/services/inv. incomes) is greater than the value of exports. Policies to reduce a current account deficit involve: Devaluation of exchange rate (make exports cheaper – imports more expensive) Reduce domestic consumption and spending on imports (e.g. tight fiscal policy/higher taxes) Supply side policies to …
Disadvantages of EU membership include: Cost. The costs of EU membership to the UK is £15bn gross (0.06% of GDP) – or £6.883 billion net. See UK government spending. (UKIP claim that the cost of EU membership in total amounts to £83bn gross if you include all possible costs, such as an ‘estimated’ £48bn of …
A current account deficit occurs when the value of imports (of goods, services and investment income) is greater than the value of exports. There are various factors which could cause a current account deficit: 1. Overvalued exchange rate If the currency is overvalued, imports will be cheaper, and therefore there will be a higher quantity …
A current account deficit means the value of imports of goods/services / investment incomes is greater than the value of exports. It is sometimes referred to as a trade deficit. Though a trade deficit (goods) is only part of the current account. If there is a current account deficit, it means there is a surplus …
Readers Question: How much are US economic policies are responsible for its current account deficit? At one stage, the US current account deficit reached 6.5% of GDP, which was one of the highest in the industrialised world. Since the early 1980s, the US has been running a persistent current account deficit. Reasons for the US …
In 1967, the UK government of Harold Wilson devalued the Pound from $2.80 to $2.40 (a devaluation of 14%). It was a major political event because the government had tried hard to avoid a devaluation, but felt forced into the decision because of a trade deficit, a weak domestic economy and external pressures from creditors. …