Readers Question: Tax changes in recent years have brought a significant increase in tax burden in the UK expressed as a percentage of GDP. Can you please assess the possible impact of such an increase? An increase in the burden of tax from say 35% of GDP to 38% of GDP could have the following …
Inflation means a sustained increase in the general price level. The main two types of inflation are Demand-pull inflation – this occurs when the economy grows quickly and starts to ‘overheat’ – Aggregate demand (AD) will be increasing faster than aggregate supply (LRAS). Cost-push inflation – this occurs when there is a rise in the …
The difference between CPI and PCE seemed relatively insignificant. However, a big issue is the difference between CPI and Core CPI. CPI is the consumer price index. A measure of the cost of living for the typical person. Core CPI is the CPI – energy and food prices. Energy and food prices are removed because …
In the nineteenth century, the UK was characterised by high levels of income inequality. However, from the start of the twentieth century until 1978, there was a steady fall in inequality and reduction in poverty (both relative and absolute). However, the 1980s saw a sharp rise in inequality which has not been reversed in the …
Explain the role of the main economic groups: consumers, producers and the government. Within an economy, there are three main groups of agents. Producers Consumers Government 1. Consumers Individuals and households who provide labour to firms and purchase goods and services. Consumers pay income tax on wages and pay indirect taxes on purchases, for example, …
Q. How does the Bank of England decide and set interest rates? The Bank of England set the repo rate. This is sometimes known as the ‘base rate’. It is the interest rate at which commercial banks (like Lloyds and Natwest) borrow from the Bank of England. The Bank of England can control liquidity and …
There are two main classifications of poverty: Absolute poverty – income below certain income necessary for basic living standards Relative poverty – household income 60% below median wages. See: Measuring poverty Absolute poverty was much more of an issue before the introduction of the Welfare State in 1945. Since 1945, rising living standards and a …
Readers Question: What are the implications of a higher dependency ratio? The dependency ratio measures the % of dependent people (not of working age) / number of working people. Children (0-15) + Number of elderly (> 65) ———————————————— Number of working age (16-65) In the western world, we are seeing an increase in the dependency …