Definition of a liquidity trap: When monetary policy becomes ineffective because, despite zero/very low-interest rates, people want to hold cash rather than spend or buy illiquid assets. A liquidity trap is characterised by Very low-interest rates Low inflation Slow/negative economic growth Preference for saving rather than spending and investment Monetary policy becomes ineffective in boosting …
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 …
Definition: Money is an object used as a medium of exchange between two parties. It can have intrinsic value like gold or it can be a universally accepted instrument such as notes and coins printed by a Central Bank. Early money These gold coins are an example of money with an intrinsic value. Made out …
I have spent past few weeks working on the new OCR A Level in economics revision guide. (H460) First teaching from Sept 2015. First A level exam Summer 2017. On the positive side, the syllabus is very detailed. OCR are very clear on what you need to cover. After doing AQA and Edexcel revision guides, …
Readers Question: Does job creation come from public or private sector? The public sector is government (national and local). Public sector jobs include doctors, police, teachers and civil servants. The private sector is private enterprises – retail, manufacturing, local services. Public sector jobs as a share of total employment UK 23.5% (2013) US 14.6% (2008) …
Summary Real business cycle models state that macroeconomic fluctuations in the economy can be largely explained by technological shocks and changes in productivity. These changes in technological growth affect the decisions of firms on investment and workers (labour supply). Hence changes in output can be traced to microeconomic and supply-side factors. Real business cycle models …
Readers Question: I was just wondering what recapitalisation of the banks actually involves? Recapitalisation involves a major change in the way a bank is funded. This could come about through issuing new shares or loan from a government. Essentially recapitalisation involves providing the bank with new capital, e.g. the government agree to buy new shares. …