Readers Question: Why was inflation higher in the 1970s? In 2022, inflation has increased in western Europe to the highest levels for many years. With inflation in UK and US approaching 10%. Yet, despite rising oil prices and other inflationary pressures, inflation is still considerably lower than in the 1970s. A big question is whether …
The budget deficit is the annual amount the government has to borrow to meet the shortfall between current receipts (tax) and government spending. Net borrowing for the UK 2021/11 is £151.8bn or 14.8% of GDP [OBR – J511] National debt or public sector net debt – is the total amount the government owes – accumulated …
Immigration can give substantial economic benefits – a more flexible labour market, greater skills base, increased demand and a greater diversity of innovation. However, immigration is also controversial. It is argued immigration can cause issues of overcrowding, congestion, and extra pressure on public services. There is also a debate about whether immigration of unskilled workers …
The UK like Europe and the US is facing an unwelcome return of stagflation – a period of higher inflation and lower growth. In March 2022, UK GDP fell 0.1%, yet at the same time, inflation has jumped to 7% with forecasts of 10% inflation by the end of the year. The Bank of England …
Cost-push inflation is caused by higher costs of production, such as rising oil prices, higher nominal wages, and increased commodity prices. To reduce this kind of inflation, the government can pursue deflationary monetary policy and/or supply side policies. But, in truth, it is difficult to reduce cost-push inflation because higher interest rates are likely to …
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 …
A summary for understanding exchange rates. Factors that affect exchange rates and the impact of exchange rates on the economy. Terminology Depreciation/devaluation – fall in value of exchange rate – exchange rate becomes weaker (see also: definition of devaluation and depreciation) Appreciation – increase in the value of exchange rate – exchange rate becomes stronger. …
Summary – Periods of high inflation usually lead to lower returns on the stock market because higher inflation is likely to lead to higher interest rates, lower economic growth and lower dividends. Impact of high inflation on share prices If the inflation rate increases, this will make investors wary for a few reasons. Firstly, if …