Whilst the UK is slowly struggling out of recession – spare a thought for Greece, who are experiencing a real economic crisis – partly of their own making – and exacerbated by the straitjacket that EURO membership entails. The Greek economy has several significant problems Current account deficit of 14% of GDP – their exports …
2010 will be a difficult year for the UK economy. After the deepest recession since the 1930s, the outlook is for a sluggish recovery. Though recovery is welcome, it still leaves the problem of spare capacity, high unemployment and record levels of peacetime government borrowing. It will be a difficult tightrope between boosting economic growth …
This graph illustrates the difference between actual GDP and potential GDP. It also indicates how much Real GDP growth has lagged behind potential growth. This means the US economy currently has substantial spare capacity. This is reflected by a rise in unemployment and factories operating below full capacity. The Real potential GDP illustrates the long …
Readers Question: I trying to find appropriate policies that the Icelandic government could adopt to deal with the country`s substantial current account deficit. Do you know what policies they are using for the moment, and more importantly which policies they should adopt? Related Problems with Iceland Economy Solving UK Current account deficit At the height …
One of the great challenges of Monetary and Fiscal Policy is knowing exactly where the economy is. If output is falling, then this justifies an easing of monetary policy (lower interest rates, or in the UK’s current situation more quantitative easing). Recently GDP statistics showed an unexpected 0.4% fall in GDP. This was a key …
Readers Question: Is it a good idea for the Baltic states to adopt the Euro before they have met the convergence criteria? Latvia and Lithuania have a target date of 2013 for joining the Euro. Estonia by Jan 1 2011. The four main convergence criteria for the joining the Euro are: Low inflation Low Government …
Readers Question: Is it possible the phenomenon to have a relationship between GDP and house prices where an increase of the mean GDP to lead to decreased house prices? Yes, An interesting phenomena is that UK house prices have shown an increase during 2009 – despite a prolonged recession. Typically, in a recession, you would …
Fear is a powerful emotion which can have significant economic implications. Often real fears are ignored in a wave of over-exuberance. Sometimes, if people had greater fear of getting into debt and falling asset prices e.t.c, the economy would be less prone to bubbles and the consequent mess. Perhaps fear isn’t the right word. – …