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 …
Definition: Economic inactivity means that people (aged 16-64) are not involved in the labour market – they are neither working or actively seeking employment. Economic inactivity includes students, early retirees and the long-term sick. There are 8.5 million counted as economically inactive in the UK. The unemployed who are seeking working and willing and able …
In the UK, house prices have shrugged off both the credit crunch and the longest recession on record. After a blip in 2007-08, house prices are at record levels. It means that UK house prices are relatively very expensive; UK house price to earning ratios are amongst the highest in the developed world. Unfortunately, there …
Household saving is defined as income that is not consumed. Savings can be kept in cash form, saved in a bank account or saved in long-term assets, such as government bonds. Quick summary of factors that influence saving levels Interest rates – higher interest rates make saving more attractive. Rising income enables higher savings. People …
The fundamental economic problem is the issue of scarcity but unlimited wants. Scarcity implies there is only a limited quantity of resources, e.g. finite fossil fuels. Because of scarcity, there is a constant opportunity cost – if you use resources to consume one good, you cannot consume another. Therefore, an underlying feature of economics is …
Readers Question: I’d like to ask you about routine ways (apart from so called “printing new money”) by which the total volume of money in the economy grows. The money supply measures the stock of money in the economy. A narrow definition of money (M0) includes the stock of notes/coins and operational deposits at Bank …
A look at factors that determine bond yields. Firstly, bond yields have an inverse relationship with the price of bonds. If demand for bonds rises (and therefore price of a bond goes up), the yield goes down. A £1,000 bond that has an interest rate of 5% – means the government will pay £50 interest payment …
The Covid recession is very expensive for governments. Not only are we experiencing the usual cyclical fall in tax receipts, but there has been unprecedented government spending – such as the furlough scheme for workers, loans for business and a large rise in welfare payments. Government borrowing will increase to record peacetime levels. In April …