Economic growth means an increase in real output (real GDP). Therefore, with increased output and consumption we are likely to see costs imposed on the environment. The environmental impact of economic growth includes the increased consumption of non-renewable resources, higher levels of pollution, global warming and the potential loss of environmental habitats. However, not all …
There are many areas of economics where respected economists may take up contrary opinions. Some of the main macroeconomic controversies include Keynesian vs Monetarist views on managing the economic cycle (role of fiscal policy) Real business cycle theories – the argument the economic cycle comes from supply, not demand. Whether there is a trade-off between …
Real wage inflation means an increase in average earnings adjusted for inflation. See also: Real wages Rising real wages means an increase in living standards and greater purchasing power of consumers. In the past decade, many economies such as US and UK have witnessed stagnant real wage growth. A rise in real wages would be …
In the UK, house prices have shrugged off both the credit crunch and the longest recession on record. After a blip in 2007-08, house prices are at record levels. It means that UK house prices are relatively very expensive; UK house price to earning ratios are amongst the highest in the developed world. Unfortunately, there …
Some potentially common mistakes in economics. 1. Confusion of rates of change and actual levels What happened to the UK price level between May 2011 and Feb 2015? The answer is that prices rose at a slower rate. There was a fall in the inflation rate. Prices were still rising just at a lower rate. …
A carbon tax aims to make individuals and firms pay the full social cost of carbon pollution. In theory, the tax will reduce pollution and encourage more environmentally friendly alternatives. However, critics argue a tax on carbon will increase costs for business and reduce levels of investment and economic growth. The purpose of a carbon …
What are the advantages and disadvantages of monopolies? Monopolies are firms who dominate the market. Either a pure monopoly with 100% market share or a firm with monopoly power (more than 25%) A monopoly tends to set higher prices than a competitive market leading to lower consumer surplus. However, on the other hand, monopolies can …
Speculation occurs when individuals make decisions about buying or selling depending on expectations of future price changes. For example, if prices are rising speculators may take this as a sign that prices will continue to rise, and therefore, they buy more. This speculation causes prices to continue to rise. An example is house prices, where …