Readers Question: Interest Rates are increased by the governments to bring down inflation rates, this makes exports price competitive as well, as a result, exports increase. However, an increase in interest rates can lead to an appreciation of the currency as demand for the currency increases. So this again increases the price of exports as …
Demand management policies are efforts to influence the level of aggregate demand (AD) in an economy. The two main types of demand management policies are: Monetary Policy Fiscal Policy To some extent, the exchange rate could be used to influence aggregate demand, but in practice, it is rarely used as a tool to influence aggregate …
Hysteresis is a concept which states that history affects the value of a current issue. In economics, hysteresis states that historical rates of unemployment are likely to influence the current and future rates of unemployment. If there is a recession and rise in cyclical unemployment, this temporary unemployment can affect the underlying structural rate and …
Diagrams showing how shifts in aggregate demand (AD) and aggregate supply (AS) affect macroeconomic equilibrium – real GDP and price level (PL) Includes short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) and classical and Keynesian view of LRAS curves. A simple macroeconomic equilibrium where AD = AS. Increase in AD when economy is close …
Movements in the stock market can be quite volatile and sometimes movements in share prices can seem divorced from economic factors. However, there are certain underlying factors which have a strong influence on the movement of share prices and the stock market in general. Generally, shares will be in greater demand when investors have the …
Carbon trading is a system of limiting carbon emission through granting firms permits to emit a certain amount of carbon dioxide. The amount of permits is decided by the government, and then permits are given to firms depending on various criteria (such as how much output a firm produces) With the permits, a firm can …
During the years 1997-2007, there was a significant rise in government spending, though as a % of GDP the rise was less marked. Source: ONS Public Sector Finances MF6U – October 2014 Government spending as a % of GDP A more meaningful comparison is to look at the share of government spending as a % …
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 …