Readers Question: what is the solution for stagflation? Stagflation occurs when there is an increase in inflation and also at the same time an increase in unemployment and lower economic growth. Typically stagflation will be caused by an increase in the cost of production which shifts the SRAS curve to the left. This could be …
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 …
An explanation of financial crisis Readers Question: What is the difference between financial crisis and economic crisis. There is no clear-cut distinction as they are closely interconnected. However, the financial crisis refers to the problems in the finance sector. In particular, this involves the mortgage defaults and rise in bank losses leading to a decline …
This is a theory which estimates the likely utility of an action – when there is uncertainty about the outcome. It suggests the rational choice is to choose an action with the highest expected utility. This theory notes that the utility of a money is not necessarily the same as the total value of money. …
Placing a tax on a good, shifts the supply curve to the left. It leads to a fall in demand and higher price. However, the impact of a tax depends on the elasticity of demand. If demand is inelastic, a higher tax will cause only a small fall in demand. Most of the tax will …
The Indian Rupee has fallen in value against a basket of currencies since independence in 1947. In recent years, the Indian Rupee has continued to depreciate in value. Indian Rupee value against US Dollar In 1990, you could buy $1 for 16 Indian Rupees. By 2013, the value of a Rupee had fallen, so that …
Readers Question: What are the implications of a higher dependency ratio? The dependency ratio measures the % of dependent people (not of working age) / number of working people. Children (0-15) + Number of elderly (> 65) ———————————————— Number of working age (16-65) In the western world, we are seeing an increase in the dependency …
RPI, CPI and RPIX are three different measures for calculating inflation. To summarise CPI = headline rate (excludes mortgage interest payments, housing costs) RPI = Retail Price Index. Includes mortgage payments. Source: ONS In 2009, the UK saw a cut in interest rates, and therefore, a fall in mortgage repayments. This caused RPI to become …