Readers Question Q) evaluate the view that ‘trade-offs will be required over the period of the cycle’? In the economic cycle, there is often a trade-offs between different macroeconomic objectives. The main macroeconomic objectives include: Low inflation Higher economic growth Low unemployment Low current account deficit Low government borrowing Stable exchange rate. For example, if the …
Barack Obama served as President from Jan 2009 – Jan 2017. When Obama came to office in Jan 2009, the US economy was in a deep recession, with falling real GDP, high unemployment and rising levels of government borrowing. As President, Obama oversaw a moderate fiscal expansion which helped to promote economic recovery and falling …
Readers Question: Could you differentiate between micro economics and macro economics? Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. Macro economics is the study of the whole economy. It looks at ‘aggregate’ variables, such as …
Readers Question: Does Government debt matter? Do high fiscal deficits threaten economic stability? Summary Many worry that high levels of government debt could cause economic instability. In certain occasions, countries with high debt have seen investors lose confidence, leading to higher bond yields and putting pressure on the government to slash spending, for example, several …
Consumer expectations refer to the economic outlook of households. Expectations will have a significant bearing on current economic activity. If people expect an improvement in the economic outlook, they will be more willing to borrow and buy goods. But, with negative expectations, they will cut back on spending and be more risk-averse. Expectations may also influence …
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 …
Economics is concerned with the optimal distribution of scarce resources within society. For example, economics is concerned with how individual decisions like how firms produce goods and which goods people buy. An important element in economics is concerned with the extent to which governments can intervene in the economy to improve economic welfare. Economics is …