Readers Question: What does it mean when Bank of England cuts interest rates by 50 base points? A basis point is one-hundredth of a percentage point. If the Bank of England cuts interest rates by 0.50% from 1.5% to 1.0%. This is a cut of 50 basis points. Usually, interest rates are cut in small …
Readers Question: Evaluate policies which a government could adopt in response to falling behind mortgage payments The problems of mortgage defaults are explained here What can the government / monetary authorities do? Cut interest rates. The MPC can cut interest rates as long as inflation is not a problem. However, the government do not set …
Readers Question: How can a smaller government fiscal deficit cause a larger international trade surplus? A smaller fiscal deficit means the government is reducing its borrowing. Therefore tax revenues must be increasing faster than government spending. A trade surplus means that the value of exports is greater than the value of imports. Suppose the government …
The Spanish economy is facing many difficult challenges. Housing Boom and Bust. Despite a relatively prudent banking sector, Spain experienced a real boom in the housing market. This was partly caused by foreign demand for holiday homes. House prices rose and there was also a boom in construction. Construction accounted for a large part of …
It is difficult to predict the dollar because there are few different factors pulling the dollar in different directions. Firstly, the dollar has been surprisingly resilient since the US slipped into its worst recession and US interest rates tumbled to near 0%. The resilience of the dollar is not based on economic fundamentals but, a …
A look at why oil prices are volatile. Readers Question: Dear Economics Help. Why is the petrol price so volatile and why when oil price falls don’t the prices of other commodities and services stay the same? The price of petrol is closely linked to the price of oil. In 2008, the price of oil …
There is an interesting article in the Economist about immigration and the impact on the Irish economy. Immigration tends to encourage a range of emotive responses, but, its impact on the flexibility of labour markets is worth considering. In the boom years, Ireland was growing by up to 5% a year or more. Growth was …
The Cardboard bike needs no oil. What is the best way to deal with high oil prices? As both a motorist and cyclist, high oil prices are a mixed blessing. It now costs £6o to fill a tank of petrol; I have seen the proportion of my income spent on petrol rise considerably. However, rising …