Summary – Periods of high inflation usually lead to lower returns on the stock market because higher inflation is likely to lead to higher interest rates, lower economic growth and lower dividends. Impact of high inflation on share prices If the inflation rate increases, this will make investors wary for a few reasons. Firstly, if …
Inflation measures how much the price of goods and services have increased over a period of time; and will have a significant impact on changes in the cost of living. An inflation rate of 5% means that on average the typical household basket of goods (e.g. food, TVs) and services (haircut, restaurant meal) is 5% …
Inflation is a sustained rise in prices and increase in the cost of living. The general costs of higher inflation will be reduced purchasing power of money, fall in the value of savings, a depreciation in the exchange rate, less certainty for firms and the inconvenience of dealing with changing prices. In addition, developing economies …
Inflation means there is a sustained increase in the price level. The main causes of inflation are either excess aggregate demand (AD) (economic growth too fast) or cost-push factors (supply-side factors). Summary of the main causes of inflation Demand-pull inflation – aggregate demand growing faster than aggregate supply (growth too rapid) Cost-push inflation – For …
Definition Wage-push inflation is the increase in general price level resulting from higher wages in an economy. Explanation of wage-push inflation If firms increase nominal wages by 5%, they experience higher costs of production. This is likely to cause firms to pass the cost increases onto consumers in the form of higher prices. Firms increase …
By different measures, US corporate profit has increased significantly in the past two decades. It stands at 10.5% of GDP. What is behind the large rises in profit? Source St Louis Fed CP (not this is for nominal profit) In 2021, US corporate profit after tax stands at 2,700 billion (or $2.7 trillion) This is …
Across the globe we are seeing a dramatic fall in the birth rate, with countries like Italy forecast to see their population decline from 61 million to 28 million by 2100. There are several reasons for falling birth rates – traditional factors include economic growth, improved education and access to contraception. But, in recent years, …
In the past two decades, we have had a remarkable period of low inflation. Inflation has been so low, some economists have suggested a new paradigm – the end of inflation as a primary economic concern. Since 2009, any predictions of imminent inflation have proved to be wide of the mark. There have been warnings …