Inflation – is defined as a persistent increase in the general price level. The inflation rate is a key statistic and has important consequences for industry. In particular, high rates of inflation often discourage investment and lead to lower long-term growth for the following reasons: How inflation affects industry Uncertainty. High and volatile inflation creates uncertainty …
To what extent can supply side policies reduce unemployment? To try and reduce unemployment, the government can provide interventionist supply-side policies, such as better training and education or it can try free-market policies, such as increasing labour market flexibility. However, there is a limit because supply-side policies are ineffective in dealing with cyclical (demand-deficient unemployment) …
New trade theory (NTT) suggests that a critical factor in determining international patterns of trade are the very substantial economies of scale and network effects that can occur in key industries. These economies of scale and network effects can be so significant that they outweigh the more traditional theory of comparative advantage. In some industries, …
The Washington Consensus refers to a set of broadly free market economic ideas, supported by prominent economists and international organisations, such as the IMF, the World Bank, the EU and the US. Essentially, the Washington consensus advocates, free trade, floating exchange rates, free markets and macroeconomic stability. The ten principles originally stated by John Williamson …
Shrinkflation occurs when firms reduce the size or quantity of a good and keep prices the same. Shrinkflation is as an alternative to inflation. Rather than increasing prices you get a smaller quantity. To buy the same quantity you have to spend more. Recently, it has received a lot of press attention, and The OED …
In the post-war period, there has been a relative decline in the size of UK manufacturing. UK manufacturing used to account for over 50% of the size of the economy. Now, manufacturing accounts for around 12-15%. However, although there has been a degree of ‘de-industrialisation’ the UK still produces more in absolute terms than previously. …
Readers Question: Discuss whether a widespread shortage of labour might be a major cause of inflation. Often a shortage of labour causes inflationary pressure. If firms are struggling to employ sufficient labour, workers are in a position to demand higher wages. This can easily lead to wage inflation which causes inflation. Micro-theory of labour shortages …
In the recent budget, the chancellor Phillip Hammond announced higher national insurance contributions for the self-employed. Class 4 NICs for the self-employed would rise from 9% to 10% in April 2018 – and then to 11% in April 2019 – on income up to the higher rate threshold of £45,000. The new rates are still …