Readers Question: What is the Economic significance of the construction industry to the UK economy, how it impacts, with respect to trend in economy. According to BIS The UK construction industry contributed 9.2% of the nations GVA (Gross Value Added) in 2007. The UK construction industry consists of over 250 000 firms employing 2.1 million …
This graph illustrates the difference between actual GDP and potential GDP. It also indicates how much Real GDP growth has lagged behind potential growth. This means the US economy currently has substantial spare capacity. This is reflected by a rise in unemployment and factories operating below full capacity. The Real potential GDP illustrates the long …
Fear is a powerful emotion which can have significant economic implications. Often real fears are ignored in a wave of over-exuberance. Sometimes, if people had greater fear of getting into debt and falling asset prices e.t.c, the economy would be less prone to bubbles and the consequent mess. Perhaps fear isn’t the right word. – …
An interesting graph showing relationship between the output gap and levels of government borrowing. A negative output gap indicates GDP is below full capacity and there is unemployed resources. Therefore, in a deep recession, like 2009, the output gap will rise. In a boom, we will have a positive output gap as firms struggle to …
Readers Question: Why is Inflation negative when prices are rising? In 2009, there was a brief period of negative inflation (RPI measure of inflation was negative) Often people ask, how come the inflation rate is negative when I notice prices rising? Firstly, if prices in the basket of goods used to measure inflation are rising, …
Oil price futures are financial contracts which involve obligations to buy or sell an instrument in the future at a fixed price. Oil price futures are a derivative, which means their value derives from the price of oil. Typically, people may buy oil futures with a 3 month date from the present time. Oil futures …
Readers Question: From my studies in economics I have always known that when there is a recession, there is a high tendency for people to borrow at a low interest rate since there is a fall in the mpc due to high unemployment right? In a recession, people tend to borrow less and save more. …
M4 is known as the ‘broad money supply’. It is a measure of notes and coins in circulation (M0) + bank accounts. This includes private-sector retail bank and building society deposits + Private-sector wholesale bank and building society deposits and Certificate of Deposit. The Bank of England produce figures on M4 growth. [link] Money supply …