The UK grocery market has become increasingly competitive in the past few years. It is a good example of an oligopoly becoming more competitive. Certainly, the growing strength of discount giants like Aldi and Lidl have really shaken up the market and diluted the cosy oligopoly previous enjoyed by the likes of Tesco and Sainsbury. …
Tight monetary policy implies the Central Bank is trying to reduce the demand for money and limit the pace of economic expansion. A tightening of monetary policy, could involve an increase in interest rates. – Higher interest rates increase the cost of borrowing and discourage investment and consumer spending. A tightening of monetary policy would …
In the recent blog – Post-war economic boom and reduction in debt, we saw how the UK successfully reduced national debt as a % of GDP from 230% of GDP to 30% of GDP, over a period of 40 years. However, the story after the First World War was very different. The UK finished the …
Readers Questions: Could you not also argue not that the Euro is a failure but that it’s members/ECB are pursuing the wrong policy? Predictions of the death of the Euro seem to have been much exaggerated & surely Europe has the potential to be a world economic superpower to rival the US or China? It …
Readers question: What happens to the underlying money (supply) if someone destroys currency rather than saving it or spending it? The money supply is the total stock of notes, coins and bank deposits in the economy. If money is destroyed (taken out of circulation) and not put back in by the Central Bank, then the …
Readers Question: Europe is in grip of real deflation and low growth period but then why Euro is on a rise In recent months, European inflation has fallen to 0.5%. In several countries within the Eurozone, countries are now experiencing actual deflation. In the past year, the Euro has appreciated against a basket of currencies, …
A look at the effects of how an over-valuation of the exchange rate can cause deflation. Readers Question: does an appreciation in the exchange rate cause deflation? An appreciation does tend to reduce inflationary pressures. This is because after after an appreciation in the exchange rate: Price of imports will fall, causing a fall in …
Readers Question Why is the forward guidance threshold set at 7% unemployment and how does this affect the threshold for inflation? The MPC have a remit to target inflation of CPI = 2% +/-1. But, the MPC also consider wider issues of economic growth and unemployment. UK Real GDP is still lower than the level …