A helicopter money drop is a form of monetary policy in which a Central Bank prints money and distributes it directly to households/consumers. The aim of helicopter money is to boost nominal GDP, overcome deflation and help reduce unemployment. In normal circumstances, printing money will be inflationary. Economists usually suggest helicopter money in a liquidity …
Recent unemployment data from the US shows a sharp fall in the unemployment rate. EU unemployment remains stuck at 11.4% – the highest since the introduction of the Euro in 1999. The diverging unemployment rates highlight the different stages of economic recovery between the two economic zones. However, sluggish EU recovery and a continued EU …
The fiscal multiplier looks at how much an initial change in injections affects real GDP. For example, if increased government spending of £1bn causes overall GDP to rise by £1.5bn, the multiplier effect is 1.5 If £1bn worth of tax rises causes real GDP to fall by £0.5bn, the multiplier effect is (0.5) Since 2009, …
Recently, I posted about the current fall in M4 lending in the UK. The concern is that fears over possible future inflation are preventing decisive action to promote economic recovery. But, these fears are misplaced. The fall in M4 lending in the UK is a sign of a fundamental weakness in demand. Given this weakness, …
M4 Definition M4 is a broad money supply measure. Briefly, M4 includes all notes and coins in circulation, deposits at banks and building societies, plus assets which are considered relatively liquid (short-term bonds, commercial paper) M4 growth is currently negative. M4 lending to private sector is currently 6.0% lower compared to past 12 month (July …
What are the key issues affecting the UK economy over the next few years? Recession and Recovery The biggest problem facing the UK economy is the lack of economic recovery. After a fall in GDP of 6% in 2008/09, the economy briefly recovered, but the recent double dip recession of 2012 has left the UK …
Readers Question: Would a devaluation help Greece? If you look at the Greek economy, their exchange rate has been effectively overvalued for several years. This overvalued exchange rate has caused Greek exports to be relatively uncompetitive and has caused various economics problems. Combined with efforts to tackle an unsustainable debt level, the over-valuation has contributed …
Balanced Budget Fiscal Expansion is an attempt to increase aggregate demand through changing spending and taxation levels, whilst leaving the overall fiscal budget situation the same. Essentially, the idea is that if you increase spending and taxes equally, the increased government spending has a bigger positive impact on economic growth than the negative impact of …