Definition of The Business cycle – The Business cycle refers to the cyclical nature of economic growth. Typically the business cycles involves a period of rapid growth followed by slower growth or in some cases a recession. The business cycle is sometimes referred to as the ‘trade cycle’ or just economic cycle. Some business cycles …
Definition of competitive devaluation: When a country tries to devalue its currency to increase its international competitiveness. However, this often encourages other countries to also devalue leading to only temporary increases in the competitiveness of exports. In competitive devaluation, a country only gains a temporary advantage until the next country devalues as well. Devaluation can …
Definition constant prices Constant prices are a way of measuring the real change in output. A year is chosen as the base year. For any subsequent year, the output is measured using the price level of the base year. This excludes any nominal change in output and enables a comparison of the actual goods and …
The Euro is a project of a monetary union and a single currency. The Euro involves a common currency and also a common monetary policy. Therefore, for membership to be successful, countries have to meet certain convergence criteria which include: 1. Inflation rate: No more than 1.5 percentage points higher than the average of the …
The Bank of England was given autonomy to set interest rates in 1997. The government set the Monetary Policy Committee MPC a target of inflation – 2% For the period 1997-2008, the Bank helped preside over a long period of economic expansion. They avoided a boom and bust economic cycle – keeping inflation low. However, …
The Euro was introduced in 1999. Criticisms of the Euro Project Include A fixed exchange rate can cause an imbalanced economy. Some countries in the Euro have become uncompetitive because of higher inflation. But, there is no devaluation to restore competitiveness. This has led to high current account deficits, low growth and high unemployment. No …
Some of the main economic criticisms of Thatcher’s economic policies Unnecessarily deep recession in 1981 Margaret Thatcher came to power in 1979 inheriting an economy with high inflation. She introduced strict Monetarist policies such as high interest rates and high taxes to try and control the money supply. This reduced inflation but at the expense …
Flight From Money is a situation where people in an economy lose faith in paper money and resort to barter or saving in the form of assets like gold or silver. Flight from money can occur during periods of hyperinflation. Hyperinflation is a situation where the inflation rate becomes very high. This means the value …