In the past two decades, we have had a remarkable period of low inflation. Inflation has been so low, some economists have suggested a new paradigm – the end of inflation as a primary economic concern. Since 2009, any predictions of imminent inflation have proved to be wide of the mark. There have been warnings …
Covid raises many problems for society and offers quite a few examples of market failure. These include: Externalities. A young person catching Covid may face few personal costs, but there is an external cost because they may transmit to more vulnerable people. Information asymmetries. There is a lot of misinformation about Covid and vaccines. This …
There are many costs associated with inflation; the volatility and uncertainty can lead to lower levels of investment and lower economic growth. For individuals, inflation can lead to a fall in the value of their savings and redistribute income in society from savers to lenders and those with assets. At extreme levels, inflation can destabilise …
At the start of the academic year, I always feel a little pressure to justify the study of economics. Students come up asking things like, should they do economics or history? It’s hard to know what to say, but to get people excited about economics it’s good to try and think how economics can be …
Economic development implies an improvement in economic welfare through higher real incomes and other welfare indices such as improved literacy, better infrastructure, reduced poverty and better health care. Economic development requires a degree of political stability, investment and mixture of public and private initiatives to increase economic potential. The main factors affecting economic development include …
Investment is expenditure on capital goods – for example, new machines, offices, new technology. Investment is a component of Aggregate Demand (AD) and also influences the capital stock and productive capacity of the economy (long-run aggregate supply) Summary – Investment levels are influenced by: Interest rates (the cost of borrowing) Economic growth (changes in demand) Confidence/expectations …
Nominal values are the current monetary values. Real values are adjusted for inflation and show prices/wages at constant prices. Real values give a better guide to what you can actually buy and the opportunity costs you face. Example of real vs nominal If you receive an 8% increase in your wages from £100 to £108, …
There are many areas of economics where respected economists may take up contrary opinions. Some of the main macroeconomic controversies include Keynesian vs Monetarist views on managing the economic cycle (role of fiscal policy) Real business cycle theories – the argument the economic cycle comes from supply, not demand. Whether there is a trade-off between …