Deflation means a fall in prices (a negative inflation rate). Though policymakers should generally be concerned if there is an inflation rate less than the target of 2%. For example, in the Eurozone Jan 2015, the headline inflation rate is -0.2%. Even if we strip away volatile prices like oil, core inflation is 0.8%. …
Expansionary monetary policy aims to increase aggregate demand and economic growth in the economy. Expansionary monetary policy involves cutting interest rates or increasing the money supply to boost economic activity. It could also be termed a ‘loosening of monetary policy’. It is the opposite of ‘tight’ monetary policy. When to pursue expansionary monetary policy The …
In recent months, we have seen a dramatic drop in oil prices. For many consumers and business, this fall in the price of oil will be welcome reduction in the cost of living and a reduction in the cost of business. However, is such a steep fall in oil prices good for the economy? Benefits of …
Definition of the ‘Brain Drain’. The brain drain problem refers to the situation where a country loses its best workers. For example, skilled workers in developing countries such as India or Pakistan may be attracted by better rates of pay and working conditions in developed countries, such as the US and Western Europe. The brain …
Readers Question: Hello can you please tell me what the disadvantages of using interest rates would be for the economy? Interest rates are used to try and achieve low inflation and stable, sustainable economic growth. However, interest rates are limited, they can’t always achieve all the governments’ macroeconomic objectives at once. Interest Rates and Inflation …
The mobility of labour refers to how easily workers can move to different jobs within the economy. The two main factors of labour mobility are: Geographical mobility – how easy is it for a worker to move between different regions and countries to seek new work. Occupational mobility – how easy is it for a …
What factors should we consider when setting monetary policy? Basics of monetary policy If inflation is above the target and economic growth too fast, the Bank will likely increase interest rates. Higher interest rates increase the cost of borrowing and reduce investment/consumer spending – leading to a lower rate of economic growth. See more at …
An examination of the advantages and disadvantages of congestion charges: Some cities, such as London have introduced a congestion charge. The aim of a congestion charge is: Reduce congestion. Therefore reduce time wasted and reduce costs for business Reduce pollution. Fewer cars will lead to less pollution. Make city centres more attractive for pedestrians and …