Readers Question: Does the Rahn Curve support the empirical evidence? If not, why not? Can you prove that there is a relationship between the level of Government Spending and GDP growth? The Rahn Curve suggests that there is an optimal level of government spending which maximises the rate of economic growth. Initially, higher government spending …
In the UK and US there is often a mistrust of the government’s inflation figures. People often feel that their cost of living is rising faster than official CPI statistics. In developing countries like Venezuela and Argentina, there is even greater mistrust as government’s have an incentive to modify inflation rates and have the power …
A look at the economic impact of an increase in the supply of female workers in labour markets. In summary: Increased female labour market participation will lead to increase in supply of labour, and in theory, could lead to lower wages. However, a gradual increase in female labour market participation is often in response to …
Readers Question: Is there an economic term for the phenomenon of ignoring (or turning a blind eye to) future risk, assuming that the current situation will prevail? I refer to the situation we currently see of both borrowers and lenders who are being caught by interest rate rises, having seemingly assumed that interest rates would …
Readers Question: Why do foreigners often hold U.S. dollars? How does the holding of dollars by foreigners affect the welfare of American? The Dollar still is the world’s reserve currency. With about 67% of the world’s currency reserves held in dollars. Up until the First World War, the British Pound was the most widely accepted …
Trade unions provide an organisation for workers to have joint representation with their employers. Trade unions have several functions: Represent workers with regard to pay and working conditions. Bargain for higher wages with the possibility of going on strike to target higher wages. Co-ordinate with firms to implement new working practises and negotiations with workers …
The essential element of Keynesian economics is the idea the macroeconomy can be in disequilibrium (recession) for a considerable time. To help recover from a recession, Keynesian economics advocates higher government spending (financed by government borrowing) to kickstart an economy in a slump. Keynesian economics includes Disequilibrium in macroeconomy (insufficient demand) Imperfect labour markets (e.g. …
Market failure occurs when the free market leads to an inefficient allocation of resources. See – types of market failure Potential market failure in housing includes Homelessness – but empty housing Expensive cost of housing and inequality. Geographical immobility (regional difference in house prices) Boom and bust in house prices and effect on macroeconomy Housing …