Involuntary unemployment is a situation where workers are willing to work at the market wage or just below but are prevented by factors beyond their control. These factors could include deficiency of aggregate demand, labour market inflexibilities, implicit wage bargaining and efficiency wage theory. In Keynesian theory, involuntary unemployment is associated with insufficient aggregate demand …
Voluntary unemployment is defined as a situation where the unemployed choose not to accept a job at the going wage rate. Reasons for voluntary unemployment Generous unemployment benefits, which make accepting a job less attractive. High marginal tax rates, which reduce effective take home pay. Unemployed hoping to find a job more suited to skills/qualifications. …
Definition of government failure: This occurs when government intervention in the economy causes an inefficient allocation of resources and a decline in economic welfare. Often government failure arises from an attempt to solve market failure but creates a different set of problems. Reasons for government failure Lack of incentives: In the public sector, there is …
Present bias occurs when individuals place a greater value on goods/income achieved in the present moment – rather than receiving the same goods/income in the future. It suggests given a choice between a payoff today and a pay off in the future; we will choose to have the pay off now. It suggests that people …
Level of Company Gross Profit in the UK Profitability of companies – ONS In 2016, Gross profit by UK non-financial companies was £2,993,446 million or £2,993 bn Cash reserves of companies have increased. In 2014, the Bank of England estimated cash reserves of UK firms at £284 billion See: Cash reserves PNFC – Private non-financial companies. …
Despite housing being a secure asset, the housing market can be prone to bubbles and periods of rapidly falling prices. In recent years, the period 2005-09 saw a prolonged and significant fall in house prices in both the US and Europe. A housing market crash can be precipitated by a change in economic fundamentals (higher …
The exchange rate is the rate at which one currency trades against another on the foreign exchange market If the present exchange rate is £1=$1.42, this means that to go to America you would get $142 for £100. Similarly, if an American came to the UK, he would have to pay $142 to get £100. …
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 …