Definition: The money supply measures the total amount of money in the economy at a particular time. It includes actual notes and coins and also any deposits which can be quickly converted into cash. There are different measures of the money supply. Narrow Money e.g. M0 = This is the level of notes and coins …
The current US administration have suggested they want to increase the US budget deficit to enable higher rates of economic growth. What does economic theory state about this idea? “We need to have new deficits because of that. We need to have the growth,” Mulvaney said. “If we simply look at this as being deficit-neutral, …
Due to lack of space in the book, we have published full bibliography on this website. Bibliography Chapter 1 Is it OK to be selfish? Frank, R H (1988) Passions Within Reason: The Strategic Role of the Emotions, p. xi. New York: W W Norton & Co. Galbraith, J K (1982) “Recession economics”, The New …
The real interest rate is the nominal interest rate – inflation rate. For example, if the Bank of England set base rates of 5.5% and the CPI inflation rate is 3.4%. Then the real interest rates is said to be 2.1% A higher real interest rate is good for savers and bad for borrowers. Note, …
A recession is defined as a decline in real GDP for two consecutive quarters. An economy is in an official recession after six months of falling national income. A recession will typically lead to higher unemployment, a decline in confidence, falling house prices, decline in investment and lower inflation. However, although that may seem quite …
Definition of Rational expectations – an economic theory that states – when making decisions, individual agents will base their decisions on the best information available and learn from past trends. Rational expectations are the best guess for the future. Rational expectations suggest that although people may be wrong some of the time, on average they …
In economics we often see a delay between an economic action and a consequence. This is known as a time lag. An impact of time lags is that the effect of policy may be more difficult to quantify because it takes a period of time to actually occur. Example of time lags Change in interest …
Readers Question: Interest Rates are increased by the governments to bring down inflation rates, this makes exports price competitive as well, as a result, exports increase. However, an increase in interest rates can lead to an appreciation of the currency as demand for the currency increases. So this again increases the price of exports as …