The 1929 stock market crash was a result of an unsustainable boom in share prices in the preceding years. The boom in share prices was caused by the irrational exuberance of investors, buying shares on the margin, and over-confidence in the sustainability of economic growth. Some economists argue the boom was also facilitated by ‘loose …
Demand management policies are efforts to influence the level of aggregate demand (AD) in an economy. The two main types of demand management policies are: Monetary Policy Fiscal Policy To some extent, the exchange rate could be used to influence aggregate demand, but in practice, it is rarely used as a tool to influence aggregate …
Readers Question: In finance and economics, there are such things as “bubbles” in the economy. And when bubbles start forming, it normally isn’t a good thing. My question is, how many different kinds of “bubbles” are there? Such as the property bubble or stock market bubble. And how do they form and what are their …
Readers Question: Can anyone explain the reasons why the Banking Crisis may have brought about increased unemployment? A banking crisis implies major banks run short of money (liquidity). In a severe banking crisis (e.g. Great Depression 1929-32), some banks may go out of business. If banks do face liquidity shortages or worse, it will have …
What is the difference between a liquidity issue and solvency issue? A liquidity issue (crisis) occurs when a firm (or country) has a temporary cash flow problem. Its assets are greater than its debts, but some assets are illiquid (e.g. it takes a long time to sell a house. A bank can’t suddenly demand a …
The Neo-classical synthesis (also referred to as the neo-Keynesian theory) refers to the post-war macroeconomic development which combined elements of Keynesian macroeconomics with more classical microeconomic theory. (This is not relevant for A-Level economics, you may be relieved to know) Up until the 1930s, economics had been dominated by classical economists who argued that markets …
Barack Obama served as President from Jan 2009 – Jan 2017. When Obama came to office in Jan 2009, the US economy was in a deep recession, with falling real GDP, high unemployment and rising levels of government borrowing. As President, Obama oversaw a moderate fiscal expansion which helped to promote economic recovery and falling …
ex ante is Latin for before the event. ex ante means we look at future events based on possible predictions. ex post is Latin for after the event. ex post means we look at results and events after they have occurred. Example of ex ante and ex post There is an example of ex ante …