2010 will be a difficult year for the UK economy. After the deepest recession since the 1930s, the outlook is for a sluggish recovery. Though recovery is welcome, it still leaves the problem of spare capacity, high unemployment and record levels of peacetime government borrowing. It will be a difficult tightrope between boosting economic growth …
The River Cam in Cambridge. Recently, we looked at why water can be more expensive than beer, even though water doesn’t attract excise duty Water is the most important commodity in the world, it is indispensable for life, yet, it is also one of the cheapest. In many circumstances we can say water is a …
Readers Question: When will the Recession end? Sometimes when it comes to making economic predictions, I am happy to stick my neck out. But, when it comes to predicting when we will see a sustained economic recovery, I find it quite difficult at the moment. In theory, the recession will have ended when we return …
Many argue that on simple purchasing power parity, the Chinese currency the Renminbi is undervalued by approximately 30%. This is a source of friction in the US, with firms claiming they lose out to a cheap Chinese currency which can undercut US goods. The Chinese government wish to keep the currency undervalued because: A weaker …
Readers Question: How do fashion retailer make profit when they offer high discounts during sales? Everyday I walk past a leading fashion clothing shop. It seems they are always very quiet except during sales periods. During sales, you can see prices discounted by 50% to 75%. How do they make profit? Firstly, the profit margin …
A recession is a period of negative economic growth. Falling output leads to higher unemployment, and this rise in unemployment causes a negative multiplier effect. e.g. those made unemployed will spend less causing even less demand in the economy. Thus there are many factors which make it difficult to get out of a recession. What …
UK Inflation Since 2000 Readers Question: How can we have both inflation and deflation in the economy at the same time? (the RPI falling to 0% and CPI rising to 3.2%) Deflation requires a fall in prices. We would need a negative inflation rate (e.g -0.3%) to have deflation Note if the inflation rate fell …
Readers Question: what are the causes of recession in india now a days? India is not in a recession. What is happening is that the growth rate is slowing down from 7% a year to an estimated 5.5% to 6.5% (link) India’s economy has been slowing down because: Fall in exports to US, Europe and …