Readers Question: How much are US economic policies are responsible for its current account deficit? At one stage, the US current account deficit reached 6.5% of GDP, which was one of the highest in the industrialised world. Since the early 1980s, the US has been running a persistent current account deficit. Reasons for the US …
Global economic imbalances refer to an unfair distribution of resources between different countries or it may refer to a one-sided trade situation. Global economic imbalances include Balance of Payments. Unbalanced trade between different economies, e.g. US trade deficit with China Unemployment levels, e.g. high unemployment in southern Europe versus low unemployment in US, UK. Poverty …
Monetary policy involves influencing and controlling the money supply/interest rates to target inflation and economic growth. Monetary policy primarily involves changing interest rates, though it can include other tools such as quantitative easing and open market operations. In recent decades there has been a trend to making Central Banks independent and responsible for setting interest …
Readers Question: Why does the government borrow? Essentially, the government borrows so that it can enable higher spending without having to increase taxes. The annual amount the government borrows is known as the budget deficit. The total amount the government has borrowed is known as the national debt or public sector debt. There are many …
What do we mean by balanced economic growth? Also, is it important for an economy to promote a balanced approach to growth? A balanced economy suggests that economic growth is sustainable in the long-term, and the economy is also growing across different sectors – and not focused on one particular industry or area. A balanced …
Readers Question: Is the fiscal policy effective/the best policy to deal with unemployment? It is an interesting question and one that is likely to generate different views from within the ranks of economists. To give a very rough overview: Keynesians say yes, fiscal policy can be effective in reducing unemployment. In a recession, expansionary fiscal policy …
Definition of tight fiscal policy Tight fiscal policy involves increasing the rate of tax and/or cutting government spending. It is sometimes known as deflationary fiscal policy and aims to improve government finances Purpose of tight fiscal policy The aim of tight fiscal policy could be either Reduce inflationary pressure by reducing the growth of aggregate …
The current US administration have suggested they want to increase the US budget deficit to enable higher rates of economic growth. What does economic theory state about this idea? “We need to have new deficits because of that. We need to have the growth,” Mulvaney said. “If we simply look at this as being deficit-neutral, …