Austerity – Pros and Cons
A look at the pros and cons of austerity (government spending cuts). Is austerity a way to solve economic problems, or does it merely lead to a deeper recession and lower tax revenues.
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Rational expectations
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 …
What caused the Wall Street Crash of 1929?
The 1929 stock market crash was a result of an unsustainable boom in share prices in the preceding years. The boom in share prices was caused by the irrational exuberance of investors, buying shares on the margin, and over-confidence in the sustainability of economic growth. Some economists argue the boom was also facilitated by ‘loose …
Costs and Benefits of Adopting the Euro
Readers Question: Evaluate the potential cost and benefits to the UK economy of adopting the Euro.” Costs of Joining the Euro Loss of independent monetary policy. In the Euro, interest rates are set by ECB but may be inappropriate for UK economy. For example, the 2008 recession hit the UK harder than other European countries …
Effects of a budget surplus
A budget surplus occurs when government tax receipts are greater than government spending. It means the government can either save money or pay off existing national debt. It is worth noting, that budget surpluses are quite rare in the past 120 years. Politicians have sometimes attempted to enshrine budget surplus into law but what are …
Winners and losers from a weak Pound
The Brexit vote has led to sharp fall in the value of the Pound, at one stage falling to £1 = $1.22 – a fall of over 15%. This will have a significant impact on British firms, consumers and also those outside Europe. In short: Winners from weak Pound UK exporters who will be more …
Demand Management Policies
Demand management policies are efforts to influence the level of aggregate demand (AD) in an economy. The two main types of demand management policies are: Monetary Policy Fiscal Policy To some extent, the exchange rate could be used to influence aggregate demand, but in practice, it is rarely used as a tool to influence aggregate …
When London house prices were £350 in the 1930s
Interesting article here about the UK economy of the 1930s escaping from the Liquidity trap and Great Depression of the 1930s. This involved: Higher inflation target Low-interest rates and negative real interest rates. Devaluation (UK left Gold Standard in 1931) The article is also interesting for another reason, a short insight into the housing market …