A look at different methods to reduce budget deficits. In summary, the three main policies are: Cut government spending Increase tax Achieve faster economic growth. A budget deficit occurs when a government spending is greater than tax revenues. This leads to an accumulation of public sector debt. If the deficits are unsustainable, this can cause …
Immigration can give substantial economic benefits – a more flexible labour market, greater skills base, increased demand and a greater diversity of innovation. However, immigration is also controversial. It is argued immigration can cause issues of overcrowding, congestion, and extra pressure on public services. There is also a debate about whether immigration of unskilled workers …
Readers question: Keeping a lower deficit of the National Budget would benefit Americans as interest rates would remain stable and allow new businesses to grow. Would you say this statement is correct? In theory, there is an argument that a rising deficit can cause a rise in bond yields and interest rates. Similarly, there is …
A look at how the housing market and changes in house prices affect the rest of the economy. In summary: Rising house prices, generally encourage consumer spending and lead to higher economic growth – due to the wealth effect. A sharp drop in house prices adversely affects consumer confidence, and construction and leads to lower …
Cost-push inflation is caused by higher costs of production, such as rising oil prices, higher nominal wages, and increased commodity prices. To reduce this kind of inflation, the government can pursue deflationary monetary policy and/or supply side policies. But, in truth, it is difficult to reduce cost-push inflation because higher interest rates are likely to …
Despite the urgency of climate change and the rapid fall in the price of renewable energy sources, the world still relies on nearly 80% of its energy source from fossil fuels. Accelerating the shift away from fossil fuels will have large environmental and economic benefits, yet progress is much slower than we need. The problem …
Wheat is the fifth most commonly traded commodity after oil, coffee, gas and gold. It accounts for approximately 21% of the world’s food and the gross world trade in wheat is greater than all other crops combined. Wheat is a key ingredient of bread, flour, and pasta, and is also used in the production of …
The effective exchange rate measures the value of a currency against a basket of other currencies. This exchange rate index is usually trade-weighted to take into account the relative importance of other currencies. When looking at the effective Sterling exchange rate we compare the value of Sterling against our main trading partners – The Euro, …