New statistics from the ONS, show that there are large disparities in wealth within the UK. In 2010/12, aggregate total wealth of all private households in Great Britain was £9.5 trillion, (increasing from £9.0 trillion in 2008-10. Some highlights from the report The wealthiest 10% of households owned 44% of total aggregate household wealth. The …
The Fisher effect examines the link between the inflation rate, nominal interest rates and real interest rates. It starts with the awareness real interest rate = nominal interest rate – expected inflation. If you put money in a bank and receive a nominal interest rate of 6%, but expected inflation is 4%, then the real …
A trade war involves the imposition of tariffs between trading partners. This will almost certainly cause a fall in economic welfare for all the countries who experience higher tariffs and a fall in trade. However, this fall in economic welfare is not the same as a recession (a fall in GDP). In some circumstances, a …
Interest rates determine the amount of interest payments that savers will receive on their deposits. An increase in interest rates will make saving more attractive and should encourage saving. A cut in interest rates will reduce the rewards of saving and will tend to discourage saving. However, in the real world, it is more complicated. …
An indirect tax is charged on producers of goods and services and is paid by the consumer indirectly. Examples of indirect taxes include VAT, excise duties (cigarette, alcohol tax) and import levies. Example of VAT as an indirect tax VAT rates may be set at 20%. This percentage tax is known as an ad Valorem …
Government intervention in the labour market to reduce inequality and market failure can take various forms. Minimum wages/living wages Maximum wages (rarely used) Legislation to prevent discrimination on the grounds of age, sex, religion. Legislation to support or regulate trade unions. Maximum working week Legislation on health and safety Behavioural nudges (e.g. encouraging workers to …
Should I boycott goods made in sweatshop factories? Another question from – What would Keynes do? This is a dilemma for an economist. If we boycott goods made in ‘sweatshop factories’ – does it help or hinder workers in developing economies? Firstly, when we hear about working conditions in some ‘sweatshop factories’ – low pay, …
Readers Question: To what extent is it necessary for the government in a developing country over-reliant on tourism to consider the expansion or agriculture and manufacturing? In theory, the law of comparative advantage states that you should specialise in producing the goods and services where you have a comparative advantage (can produce at the lower …