Readers Question: Can you please discuss the nature of the current account deficit and the exchange rate in the UK along with the theory that would suggest there is a relationship between the exchange rate and the current account. A current account deficit implies the value of imports of (goods/services/investment incomes) is greater than the …
How can a change in the terms of trade affect the balance of payments ? How can a change in the balance of trade affect the terms of payments ? The terms of trade is the index of export prices divided by index of import prices (*100) The current account balance of payments is primarily …
A devaluation leads to a decline in the value of a currency making exports more competitive and imports more expensive. Generally, a devaluation is likely to contribute to inflationary pressures because of higher import prices and rising demand for exports. However, the overall impact depends on the state of the economy and other factors affecting …
After the UK’s decision to leave the EU, what economic problems will it face? Summary of problems Devaluation of Pound Sterling, increasing price of imported goods, such as food, oil, manufacturers and domestic inflation. This cost-push inflation is again putting pressure on real wages. WIth low nominal wage growth – inflation has led to falls …
Readers Question: Does expansionary monetary policy, where money supply is increased, also cause a depreciation in the currency? – Since there is a surplus of the currency in the foreign exchange market. Expansionary monetary policy means policies to increase demand in the economy. Expansionary monetary policy typically will involve: Lower interest rates – to make …
Readers Question: From: How Does the Stock Market Affect the Economy I want to know the basic principle behind the working of share market? What is the profit, company is getting from shares? Does the downfall in share price affect the overall performance of the company? Basic Principles of Stock Market Companies list shares on …
Readers Question: Explain what is meant by a balance of payments disequilibrium? The Balance of Payments is comprised of two main components: The Current Account (trade in goods, services + transfer payments and investment incomes) The Financial Account (used to be called capital account; this is capital flows such as foreign direct investment) If the …
Definition of ceteris paribus Ceteris paribus is a Latin phrase meaning ‘all other things remaining equal’ The concept of ceteris paribus is important in economics because in the real world it is usually hard to isolate all the different variables. Assuming ceteris paribus allows us to simplify economics – we can understand how something like …