Gross interest rate. This is the total interest payable before any deductions such as tax and charges. For example, the gross interest rate on a savings account maybe 4.4% Net Interest Rate. This is the total interest payable after any deductions. For example in the UK, the net interest rate will be the gross interest …
Readers Question: Why can’t a debt-crippled and deficit-induced state, go on with its most normal economic activities (by borrowing the needed money to make sure that no or at the most, unproductive spendings are curbed, no tax rates up, and no austerity measures) in a bid to emerge out of debt & deficit potholes sooner …
Readers Question Can a fiscal stimulus package reduce the extent of the recession? Fiscal stimulus involves a combination of lower tax cuts and higher spending. In theory the tax cuts will increase disposable income and therefore encourage consumer spending, leading to higher aggregate demand and economic growth. Fiscal stimulus is typically financed by higher government …
A look at why the value of the Euro is relatively strong despite the serious economic problems that the Eurozone faces. Readers Question: We keep getting told we face an imminent crisis. The Euro will fail, recession looms yet the stock markets soar after a sticking plaster is attached and the Euro remains high on …
Readers Question: The argument in Europe at the moment is whether the ECB should be able to buy bonds (new? old?) directly from governments as well as being able to buy old ones on the open market (“secondary market”?). Is it correct that in either case that the ECB would just the create Euros to …
Readers Question: I am much in favour of governments defaulting on what they owe to private financial institutions (as opposed to other governments). This would be in line with the ideas fuelling the current OCCUPY THE WALL STREET movement. I would very much like someone to comment if this is at all possible and practical. …
A key test in understanding economics is being able to interpret data. If you really want you can present data in a way which supports your argument. Therefore, always be careful about how you look at data. This is an example of how you could view employment statistics in the US. Total employment This graph …
Readers Question: If the markets decide the UK is not such a safe haven and bond yields rise will pension funds heavily weighted in Gilts tend to fall? Yes. If investors feel that the UK is not a safe haven (they feel increased risk of UK government default). Then investors will sell UK bonds, this …