Definition of expansionary fiscal policy. This involves the government seeking to increase aggregate demand – through higher government spending and/or lower tax. Expansionary fiscal policy is usually financed by increased government borrowing – and selling bonds to the private sector. Keynes said expansionary fiscal policy should be used during a recession – when there is …
Economic growth measures the change in real GDP (national income adjusted for inflation; ONS call it chained volume measure of GDP) Since the end of the great recession (2008 – 2009) the UK economy has grown in fits and starts. It has been a relatively weak economic recovery compared to previous recessions. 2019 has seen …
A bank is a financial institution which is involved in borrowing and lending money. Banks take customer deposits in return for paying customers an annual interest payment. The bank then uses the majority of these deposits to lend to other customers for a variety of loans. The difference between the two interest rates is effectively …
Economic growth is an increase in real GDP; it means an increase in the value of goods and services produced in an economy. The rate of economic growth is the annual percentage increase in real GDP. There are several factors affecting economic growth, but it is helpful to split them up into: Demand-side factors (e.g. …
There are two main strategies for reducing unemployment – Demand side policies to reduce demand-deficient unemployment (unemployment caused by recession) Supply side policies to reduce structural unemployment / (the natural rate of unemployment) A quick list of policies to reduce unemployment Monetary policy – cutting interest rates to boost aggregate demand (AD) Fiscal policy – …
A ‘no deal Brexit’ would involve a departure from the EU, the single market and the EU Customs union. Brexiteers have suggested the UK would adopt WTO rules for trade. This means, in the absence of any trade deal, it would lead to higher export tariffs and trade disruption from non-tariff barriers – the WTO …
The demand for money refers to how much assets individuals wish to hold in the form of money (as opposed to illiquid physical assets.) It is sometimes referred to as liquidity preference. The demand for money is related to income, interest rates and whether people prefer to hold cash(money) or illiquid assets like money. This …
Readers Question: Discuss the impact of a decrease in government spending? If the UK government cut government spending, it would have a significant impact on both aggregate demand (AD) and the supply side of the economy – depending on which areas of public spending were cut. Firstly, government spending (G) is a component of Aggregate …