Monetary policy (mainly interest rates) used to be managed by the government. However, in recent years, there has been a trend to give monetary policy to independent Central Banks. The idea is that Central Banks will be more independent of political considerations and willing to keep inflation low – even if there are political costs …
A look at the impact of strong (overvalued) currency Readers Question: Why would a strong currency be bad for a country? If we consider a country like an individual, having a strong currency means the country can accumulate more assets and resources for its people, thereby increasing the value of its country. As for the …
What happens when bubbles burst? Who experiences the most financial losses, and how does it affect the economy? I was reading about the famous Tulip mania of the Netherlands in the 1630s. Firstly, some of the stories may have been slightly exaggerated, but there was no doubt that small tulip bulbs vastly increased in price …
Technological unemployment occurs when developments in technology and working practices cause some workers to lose their jobs. Technological unemployment is considered to be part of a wider concept known as structural unemployment. Example of technological unemployment When labour-saving machines are introduced into the productive process, a firm can get rid of workers and produce the …
Readers Question: Please is there any solution to national/public debt? National (public sector) debt is the outstanding level of debt owed by the government to the private sector. It is the accumulation of annual budget deficits. Do we need a solution? Firstly, it is worth evaluating whether we need an actual ‘solution.’ National debt has …
Readers Question: From: How Does the Stock Market Affect the Economy I want to know the basic principle behind the working of share market? What is the profit, company is getting from shares? Does the downfall in share price affect the overall performance of the company? Basic Principles of Stock Market Companies list shares on …
Involuntary unemployment is a situation where workers are willing to work at the market wage or just below but are prevented by factors beyond their control. These factors could include deficiency of aggregate demand, labour market inflexibilities, implicit wage bargaining and efficiency wage theory. In Keynesian theory, involuntary unemployment is associated with insufficient aggregate demand …
Tight monetary policy implies the Central Bank (or authority in charge of Monetary Policy) is seeking to reduce the demand for money and limit the pace of economic expansion. Usually, this involves increasing interest rates. The aim of tight monetary policy is usually to reduce inflation. With higher interest rates there will be a slowdown …