Readers Question: how the unemployment and inflation is related to country’s economy If we take the example of the UK, we can see differing examples of how unemployment and inflation are related to a country’s economy. The key to this question is what causes unemployment and inflation. There are several different factors, but it is …
Readers Question: How about the case of cost push inflation like that of China? there’s high inflation and yet the economy is not operating at its full level of employment and due to the fact that its exchange rate is fixed, monetary policies would not be effective but fiscal policies would further increase unemployment. What …
Readers Question: Which businesses are likely to benefit from a recovery in the housing market? I think it is a little premature to talk of a recovery in the housing market. But, nevertheless when there is a recovery in the housing market the following firms will benefit. House Builders. At the moment there is a …
An interesting development is Microsoft’s bid to buy Yahoo. This would be one of the biggest mergers, and change the nature of the internet. It is rather ironic that Google, have filed a complaint on the ground the new firm would have too much market power. It is interesting because it was Microsoft who was …
Equilibrium national income occurs where aggregate supply equals aggregate demand. An increase in equilibrium national income requires an increase in long-run aggregate supply and aggregate demand. Equilibrium national income and Keynesian Consumption function We can also show equilibrium national income using a Keynesian consumption function. In this case, an increase in domestic aggregate demand (C+I+G) …
Readers Question: If there is a increase in GDP why is development often unseen? Higher GDP means an increase in National Output and National Income but it doesn’t necessarily lead to economic development this is for the following reasons: Investment takes Time. It takes time for improvements in statistics like education and literacy rates. Higher …
Readers Question. Explain how interest rates could be used to boost the economy. Why, then do the govenment frequently hesitate to take such steps. Interesting Question. Generally, lower interest rates help increase consumer spending, investment and economic growth. Lower interest rates help increase Aggregate Demand for various reasons. Lower interest rates make borrowing cheaper encouraging …
Readers Question: What are the effects of the economic decline in America to the country of Vietnam? If the US economy entered into a recession the main effects on other countries would be: 1. A decline in exports. American consumers are a key component of world trade. If there was a decline in exports to …