After the UK’s decision to leave the EU, what economic problems will it face? Summary of problems Devaluation of Pound Sterling, increasing price of imported goods, such as food, oil, manufacturers and domestic inflation. This cost-push inflation is again putting pressure on real wages. WIth low nominal wage growth – inflation has led to falls …
Readers Question: How does an increase in imports cause inflation in the economy? If the quantity of imports increases, this should reduce domestic demand-pull inflation (AD = C+I+G+X-M). Therefore if consumers spend more on imports it will, ceteris paribus, reduce domestic demand. Therefore, we get lower growth of AD and lower inflation. Suppose there is an …
Monetary policy (mainly interest rates) used to be managed by the government. However, in recent years, there has been a trend to give monetary policy to independent Central Banks. The idea is that Central Banks will be more independent of political considerations and willing to keep inflation low – even if there are political costs …
A look at the impact of strong (overvalued) currency Readers Question: Why would a strong currency be bad for a country? If we consider a country like an individual, having a strong currency means the country can accumulate more assets and resources for its people, thereby increasing the value of its country. As for the …
Technological unemployment occurs when developments in technology and working practices cause some workers to lose their jobs. Technological unemployment is considered to be part of a wider concept known as structural unemployment. Example of technological unemployment When labour-saving machines are introduced into the productive process, a firm can get rid of workers and produce the …
Due to lack of space in the book, we have published full bibliography on this website. Bibliography Chapter 1 Is it OK to be selfish? Frank, R H (1988) Passions Within Reason: The Strategic Role of the Emotions, p. xi. New York: W W Norton & Co. Galbraith, J K (1982) “Recession economics”, The New …
Tight monetary policy implies the Central Bank (or authority in charge of Monetary Policy) is seeking to reduce the demand for money and limit the pace of economic expansion. Usually, this involves increasing interest rates. The aim of tight monetary policy is usually to reduce inflation. With higher interest rates there will be a slowdown …
The 1929 stock market crash was a result of an unsustainable boom in share prices in the preceding years. The boom in share prices was caused by the irrational exuberance of investors, buying shares on the margin, and over-confidence in the sustainability of economic growth. Some economists argue the boom was also facilitated by ‘loose …