Capital controls are government measures to limit the flow of financial capital and financial assets. Capital controls include limits on foreign currency exchange, limits on the purchase of assets and taxes on financial transfers. Some economists argue that capital controls can help limit destabilising capital flows which cause banking crisis and economic booms and busts. …
Sometimes governments may wish to reduce the value of their currency. A depreciation in the value of a currency would make exports cheaper, imports more expensive and can provide a boost to domestic demand. If the economy is stuck in recession or unemployment rising, reducing the value of a currency can help increase economic growth …
The multiplier effect occurs when an initial injection into the circular flow causes a bigger final increase in output. For example, an increase in government spending of £1 billion leading to an increase in national output of £1.5 billion. (giving multiplier effect of 1.5) The wealth multiplier effect refers to how the ownership of wealth …
During the Great Depression, US unemployment rate rose from virtually 0% in 1929 to a peak of 25.6% in May 1933. This was the equivalent of 15 million people unemployed. Though this unemployment rate also excluded those on reduced hours or migrants/women not eligible to officially sign on for benefits. The unemployment caused serious economic …
I started www.economicshelp.org in Nov 2006. Within a year, I was writing about the US housing crash, the credit crunch and the recession of 2008/09. It was a turbulent period and there was a surge of interest in economics, which helped the economics blog to take off (which left me with mixed feelings!) But, the …
Crowding in occurs when higher government spending leads to an increase in private sector investment. The crowding in effects occurs because higher government spending leads to an increase in economic growth and therefore encourages firms to invest because there are now more profitable investment opportunities. Difference between crowding out and crowding in When the government …
The negative multiplier effect occurs when an initial withdrawal of spending from the economy leads to knock-on effects and a bigger final fall in real GDP. For example, if the government cut spending by £10bn, this would cause a fall in aggregate demand of £10bn. However, the effect may be greater than the £10bn. If …
Since the credit crisis of 2008, the UK economy has experienced structural weakness of Low economic growth Very poor productivity growth Weak demand Unbalanced economy geared towards consumption and low levels of investment. In addition to these structural weaknesses, the UK economy in 2020 now faces real threats from A hard Brexit Risk of slowdown …