Readers Question: Can you explain the short-term and long-term effects of Osborne legislating that there must be budget surpluses in any year when growth exceeds 1%, which is almost every year, whilst we have a rather large current account deficit. What will be the effects of this on private sector companies, public investment, households, the …
Readers Question: How can a developing country grow without inflation? Economic growth can lead to inflation, for example, if demand rises faster than productive capacity, then we will see rising prices. However, economic growth is compatible with low inflation, and developing economies which can increase productive capacity and general efficiency can see rising living standards …
Readers Question: But what happens to the balance of payments in a recession? (from: What happens in a recession) In a recession, the current account is likely to show an improvement (reduction in deficit). This is because: In a recession consumer spending falls, therefore spending on imports decreases. In a recession, interest rates are cut. …
Ireland has often held up to be a model country. Firstly, in the boom years, Ireland was a model of low taxes and deregulation. It’s rapid economic growth saw praise from both sides of the Atlantic. But, after the crash, Ireland has experienced a deep fall in GDP and the model of growth proved highly …
The UK economy in 2016 is emerging from a long period of economic stagnation and the recession of 2008-12, and has some positive signals of growth, low inflation and falling unemployment. However, the UK chancellor has been giving mixed signals. On the one hand he has pointed out that UK has one of the strongest …
Readers Question: What are the main reasons for the decline of the pound, and what are the costs and benefits of a low pound? The decline of the Pound could be due to Cuts in interest rates Declining economy – causing expectation of lower interest rates ‘Technical positions’ dealers selling Pounds to get rid of …
A useful tool for students is the idea of an ‘economist toolkit’. This is essentially a few key ideas that can be used to help answer different questions. Let us consider a question. – Discuss the impact of an increase in interest rates? Macro-Economic Toolkit This question is quite open-ended. First of all, consider the …