Definition: The natural rate of unemployment is the rate of unemployment when the labour market is in equilibrium. It is unemployment caused by structural (supply-side) factors. (e.g. mismatched skills) Diagram showing the natural rate of unemployment The natural rate of unemployment is the difference between those who would like a job at the current wage …
Readers Question: What are the effects of the exchange rate on UK businesses? The exchange rate will play an important role for firms who export goods and import raw materials. Essentially: A depreciation (devaluation) will make exports cheaper and exporting firms will benefit. However, firms importing raw materials will face higher costs of imports. An …
Readers Question: Could you give a summary of Keynesian and Classical views? Summary Classical economics emphasises the fact that free markets lead to an efficient outcome and are self-regulating. In macroeconomics, classical economics assumes the long run aggregate supply curve is inelastic; therefore any deviation from full employment will only be temporary. The Classical model …
The stock market is a place where traders buy and sell shares, government bonds and other assets. The stock market shows the price of shares and facilitates companies to raise revenue from issuing shares. Investors buy shares for both dividends and the prospect of capital gains. the US stock exchange based in NY (NYSE) has …
There are two main strategies for reducing unemployment – Demand side policies to reduce demand-deficient unemployment (unemployment caused by recession) Supply side policies to reduce structural unemployment / (the natural rate of unemployment) A quick list of policies to reduce unemployment Monetary policy – cutting interest rates to boost aggregate demand (AD) Fiscal policy – …
The World Bank publishes several measures of global poverty, which measure poverty by different levels of income. The most common is the percentage of the population who live on less than $1.90 a day. This is a measure of absolute poverty. There are also measures of relative poverty which compare income against the national average. …
The demand for money refers to how much assets individuals wish to hold in the form of money (as opposed to illiquid physical assets.) It is sometimes referred to as liquidity preference. The demand for money is related to income, interest rates and whether people prefer to hold cash(money) or illiquid assets like money. This …
The inflation rate measures the annual percentage rise in the cost of living. (CPI) A rise in the inflation rate – means prices are rising at a faster rate. Summary of higher inflation In the short-run, it is more likely the Central bank will increase interest rates to moderate the inflation rate. Savers who have …