The main macroeconomic objectives of the government will include: low inflation, increasing the sustainable rate of economic growth full employment and balance of payments equilibrium. Full employment involves zero or very low unemployment. In practice, there will always be some frictional unemployment as people are looking for new jobs or leaving school. Economists suggest an …
Involuntary unemployment is a situation where workers are willing to work at the market wage or just below but are prevented by factors beyond their control. These factors could include deficiency of aggregate demand, labour market inflexibilities, implicit wage bargaining and efficiency wage theory. In Keynesian theory, involuntary unemployment is associated with insufficient aggregate demand …
Definition of Budget constraints A budget constraint occurs when a consumer is limited in consumption patterns by a certain income. When looking at the demand schedule we often consider effective demand. Effective demand is what people are actually able to spend given their limitations of income. Temporary budget constraints can be overcome by borrowing, but …
Ability to pay refer to whether individuals have the effective income to be able to purchase a good. The ability to pay is often used as the justification for a fair tax. A good tax should have various attributes one of which is equality. A fair tax should reflect the ability to pay. For example, …
Readers Question: What is the name of a type of good that only has value to someone if no one else possesses it? A snob or ostentatious good is a good where the main attraction is related to its image of being expensive, exclusive and a symbol of social status. These goods will have restricted …
The River Cam in Cambridge. Recently, we looked at why water can be more expensive than beer, even though water doesn’t attract excise duty Water is the most important commodity in the world, it is indispensable for life, yet, it is also one of the cheapest. In many circumstances we can say water is a …
The 1980s was a decade of divides. The proud industrial heartlands of the north suffering irreversible decline. The City of London enjoying an unprecedented boom. In the early 80s, Unemployment soared to the highest level since the Great Depression, manufacturing fell off a cliff. But not everyone suffered in the 80s. Financial liberalisation and tax …
In the early 1980s, housing was around 4 times income, but today, a buyer will need 8 times their income. Young people cannot afford to buy, with average deposits running at over £60,000. Renting has also soared in recent years, with average rents nearly £1,400 a month in England, and £2,200 in London. In the …