Supply and demand are a fundamental basis of economics; they help explain the determination of price and output in different markets. The supply curve shows the amount of goods firms are willing to sell at different prices. At higher prices, it becomes more profitable to sell the goods, so supply tends to rise with the …
When reading economic articles in the past few years, you may frequently come across the reference to the ‘zero lower bound’ or ZLB. What is the Zero Lower Bound rate? In short – when interest rates can’t fall any further below 0% Examples of ZLB UK interest rates were cut to 0.5% in March 2009 …
The misery index (sometimes known as the Economic Discomfort Index EDI ) is simply the sum of the inflation rate plus the unemployment rate. The higher the combined score, the worse the economic situation. The Misery index was developed by economist Arthur Okun. Where Unemployment rate (ut) and the current inflation rate (πt) High unemployment …
Economic growth means an increase in real GDP – an increase in the value of national output, income and expenditure. Essentially the benefit of economic growth is higher living standards – higher real incomes and the ability to devote more resources to areas like health care and education. Video summary The benefits of economic growth …
Deflation is defined as a fall in the general price level. It is a negative rate of inflation. The problem with deflation is that often it can contribute to lower economic growth. This is because deflation increases the real value of debt – and therefore reducing the spending power of firms and consumers. Also, falling …
The size of current account deficit/surplus is affected by several factors including: Exchange rate (overvalued exchange rate would cause large deficit) Level of consumer spending (economic growth) and hence import spending Capital flows to finance deficit in long-term Saving rates – influencing level of import spending Relative inflation/competitiveness The current account measures: The balance of …
Definition of market equilibrium – A situation where for a particular good supply = demand. When the market is in equilibrium, there is no tendency for prices to change. We say the market-clearing price has been achieved. A market occurs where buyers and sellers meet to exchange money for goods. The price mechanism refers to …
Supply side policies are efforts to increase competitiveness and efficiency in the economy. They can include policies such as tax cuts, privatisation, investment in education and more flexible labour markets. Usually, supply side policies are long-term efforts to increase productivity and the long-run trend rate of growth. The traditional solution to a recession is to …