Readers Question: But what happens to the balance of payments in a recession? (from: What happens in a recession) In a recession, the current account is likely to show an improvement (reduction in deficit). This is because: In a recession consumer spending falls, therefore spending on imports decreases. In a recession, interest rates are cut. …
Readers Question: Economic theory says that when Quantity (Q.S) increases Price (P) should ordinarily fall. After the 2007 crisis in the USA, the FED pumped billions of Dollars into the economy through QE. However the price of dollars, interest rate has not only fallen lower, but is closer to zero as of today ( 2016). …
Ireland has often held up to be a model country. Firstly, in the boom years, Ireland was a model of low taxes and deregulation. It’s rapid economic growth saw praise from both sides of the Atlantic. But, after the crash, Ireland has experienced a deep fall in GDP and the model of growth proved highly …
Some interesting data about large multinationals and the amount of tax they have paid in the UK, compared to their turnover. If we look at tax as a % of 2011 turnover, we see many paying a small percent. Source: Guardian data via Duedil
Readers Question: What are the similarities and differences between the Bank of England and the ECB? Thank you They are both responsible for controlling inflation. However, this year, the Bank of England have shown much greater flexibility and willingness to consider other objectives such as full employment and preventing recession. The ECB has been much …
Currency wars are said to occur when countries seek to devalue their currency to gain a competitive advantage. However, if one country seeks to become more competitive through devaluation, it means other countries become less competitive. Therefore, they may respond by weakening their currency too. Thus, we may get a situation of competitive devaluation where …
Accommodative monetary policy means a policy of allowing the money supply to rise in line with national income and the demand for money. Accommodative monetary policy will also usually involve lower interest rates. Accommodative monetary policy may also be known as ‘easy monetary policy’ / loose monetary policy / expansionary monetary policy. The aim of …
Definition of Frictional Unemployment This is unemployment that occurs from the inevitable time delays in finding new employment in a free market. It may also be called ‘search unemployment’ as it relates to the time taken to search for new employment. For example, if you graduate from university, you can’t necessarily expect to find …