Readers Question From why inflation makes it easier to pay government debt 1. Why will wages increase with inflation? There is no law that inflation will automatically lead to higher nominal wages. It is possible for inflation to be higher than the nominal wage growth. In this case, workers see a fall in real wages …
Readers Question: I have been interested in the US economy in the last few months, and with current news of their $14 trillion debt problem heating up, I’m wondering could the demand for dollars go down, if they were possible to have a similar or close problems of debt issues like Greece, and if the …
Readers Question: How can a larger government fiscal deficit case a larger international trade deficit Firstly, it is important not to confuse the two deficits. Government fiscal deficit occurs when government spending is greater than tax revenues. The deficit is the annual government borrowing requirement, measured by Public Sector Net Borrowing. International Trade deficit implies …
Source: ONS This graph shows how inflation rates for different categories can vary enormously. Firstly, gas and electricity prices are by far the most volatile. This reflects the volatile nature of supply, it also reflects the fact demand and supply are inelastic. See: volatile food prices for the economic theory behind this volatility. Despite the …
Though the UK economy may appear very weak to British consumers who are facing tax rises and spending cuts, there are various reasons which explain why sterling has recently been stronger and could continue its upward movement. Prospect of Higher Interest rates. With one of the highest inflation rates in Europe, and higher than US, …
See: Factors affecting UK Current account deficit. Post updated Feb, 2011. The UK has had a persistent current account deficit for the past couple of decades. The deficit has never gained much concern from politicians or economists. However, with the recent increase in the size and significance of the deficit there are an increasing number …
The coalition expects 490,000 public sector jobs to be lost by 2014-15 as a direct result of its drastic spending cuts, Danny Alexander, the chief secretary to the Treasury, has accidently disclosed. (link to Guardian) In addition the spending cuts, wage freezes and job losses will have a knock on effect to the rest of …
Readers Question: Where is the US economy headed? Is it inflation or depression? Recently, Goldman Sachs predicted a rough year ahead for the US Dollar. They forecast the dollar may fall against Pound Sterling to $1.85 in 12 months. Against the Euro, they forsee it to fall to $1.55 in a year’s time. Exchange rates …