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 …
Click to enlarge National debt (public sector debt) is the total amount of liabilities the government owe to the private sector (plus liabilities held by Central Bank). National debt is typically bought by domestic private sector (banks, insurance funds, pension funds) and foreign investors (foreign banks) Recently some has been bought by the Bank of …
The housing market is influenced by the state of the economy, interest rates, real income and changes in the size of the population. As well as these demand-side factors, house prices will be determined by available supply. With periods of rising demand and limited supply, we will see rising house prices, rising rents and increased …
The learning effect can mean one of two things How education leads to increased productivity and higher wages How production processes can learn from past production to increase productivity over time. The learning effect can lead to a learning curve – which represents how average costs of production change over time. Learning effect – Education …
Readers’s question: What is the difference between depreciation and inflation? Depreciation refers to a fall in the value of an asset. A depreciation of the exchange rate means a currency becomes worth less than others. For example, the Pound sterling falls in value against the dollar/euro/Yen. This graphs shows that the value of the Pound …
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 output gap is a measure of the difference between actual output (Y) and potential output (Yf). Output gap = Y- Yf A Negative Output Gap occurs when actual output is less than potential output gap. In a recession, a fall in Real GDP causes a negative output gap. However, it can become difficult to …
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, …