A trade deficit implies the value of imports of goods is greater than exports. (M>X) The trade deficit is an important component of the current account on the balance of payments. Sometimes people use a trade deficit and a current account interchangeably, but in the UK this is not correct. The current account also includes …
Readers Question: How do bond spreads affect the value of the Dollar or Euro? A bond yield refers to the interest payment that you receive from holding the bond yield. If the yield is 4%, you can expect £4 a year from a £100 bond. A bond spread refers to the differences in bond yields. …
Readers Question: What policies could be used to ease pressure on housing market? Firstly, the main pressure in the UK housing market is the persistent and continued above inflation price increases. Back in 2004, Kate Barker’s report into housing market trends found that the UK would need to build 250,000 houses to reduce the house …
Readers comment on – House prices stats Excuse me for pointing out the obvious, but why are those ratios (House price to incomes) unsustainable if interest rates stay low? It’s the ratio of house-price-multiplied-by-interest-rate to earnings that determines affordability, not ratio of house price to earnings. If rates fall as prices rise, then the first …
Readers Question: How Has China’s Economic Industrialisation affected the UK’s Economy? And What Policies Could The UK Government Implement To Rectify The Problems Created From China’s Growth? The rapid growth of China’s economy has had various effects on the UK economy – some positive and some which have created challenges and problems for the UK. …
Readers Question: Europe is in grip of real deflation and low growth period but then why Euro is on a rise In recent months, European inflation has fallen to 0.5%. In several countries within the Eurozone, countries are now experiencing actual deflation. In the past year, the Euro has appreciated against a basket of currencies, …
Readers Question Why is the forward guidance threshold set at 7% unemployment and how does this affect the threshold for inflation? The MPC have a remit to target inflation of CPI = 2% +/-1. But, the MPC also consider wider issues of economic growth and unemployment. UK Real GDP is still lower than the level …
An interesting question at the moment is to what extent does temporary cost-push factors lead to a permanent rise in underlying inflation? Temporary cost-push factors include rising commodity prices, rising food prices, higher taxes. These goods are often volatile so the increase is often temporary. In the case of taxes, the price increases last for …