In September 2011, CPI inflation rose to 5.2%, well above the government’s inflation target of 2%. RPI inflation is even higher at 5.6% Why have the Bank of England kept interest rates at 0.5% despite this increase in inflation? Should we not be more concerned about inflation? Price indices and inflation ONS Reasons To be …
Readers Question: I am wondering why the 75 billion of quantitative easing that the Bank of England announced today to be “injected into the economy” isn’t spent on infrastructural projects? Why spend those funds on government bonds? This doesn’t seem to be the best way of using these funds. Many thanks. It’s a good question. …
A feature of the UK housing market is the low quantity of new houses built compared to the long term growth in demand. Despite high house prices, firms are unable / unwilling to build as many as market forces dictate. The supply of housing is price inelastic. The lack of supply has meant that the …
Readers Question: How likely are we to go into a double dip recession? There are many reasons to be gloomy about the current global economic prospects. A technical recession involves two consecutive quarters of negative economic growth. We may avoid this actual fall in GDP, but we will definitely experience below trend economic growth – …
Readers Question. You said that if Greece leaves the Euro, the Drachma will depreciate. Why will this happen? If Greece did leave the Euro, then the currency which replaced the Euro, would definitely fall in value. Greeks would soon see the price of imports increase. The foreign price of Greek exports would fall. If Greece …
The idea of a debt ceiling is to place a limit on how much the government can borrow. (you could think of it like a limit on your credit card) For example, in July 2011, the US debt ceiling was $14.3 trillion (£8.8 trillion) The idea of having a debt ceiling is that The government …
Readers Question: Should Greece Leave the Euro? Arguments for and against Greece leaving the Euro. One thing is clear, the Greek situation is dire. Government debt is very high, yet extremely harsh austerity measures have only succeeded in pushing the economy back into recession and leading to much higher unemployment. Within the Eurozone, Greece is …
Though the UK economy may appear very weak to British consumers who are facing tax rises and spending cuts, there are various reasons which explain why sterling has recently been stronger and could continue its upward movement. Prospect of Higher Interest rates. With one of the highest inflation rates in Europe, and higher than US, …