Economic growth means an increase in real GDP. Economic growth means there is an increase in national output and national income. Economic growth is caused by two main factors: An increase in aggregate demand (AD) An increase in aggregate supply (productive capacity) See latest stats on economic growth Demand-side causes In the short term, economic …
Readers Question: To what extent do the official UK figures for unemployment accurately reflect economic reality? The unemployment rate measures those who are officially seeking work but unable to find employment. However, the official unemployment rate does not include those who are not working and are classed as economically inactive. For example, economically inactive can …
In recent years, the British Banking system has become highly concentrated due to the wave of mergers following the credit crunch. Top 5 British Owned banks Bank Market value (£bn) As of October 2013 Assets (£bn) As of 31 March 2017 1. HSBC 126 1,936 2. Lloyds Banking Group (Bank of Scotland/Halifax) 53.5 817 3. …
A recession is a period of negative economic growth. In a recession, we see falling real GDP, falling average incomes and rising unemployment. This graph shows US economic growth 2001-2016. The period 2008-09 shows the deep recession, where real GDP fell sharply. Other things we are likely to see in a recession 1. Unemployment The …
The Harrod Domar Model suggests that the rate of economic growth depends on two things: Level of Savings (higher savings enable higher investment) Capital-Output Ratio. A lower capital-output ratio means investment is more efficient and the growth rate will be higher. A simplified model of Harrod-Domar: Harrod-Domar in more detail Level of savings (s) = …
Definition of expansionary fiscal policy. This involves the government seeking to increase aggregate demand – through higher government spending and/or lower tax. Expansionary fiscal policy is usually financed by increased government borrowing – and selling bonds to the private sector. Keynes said expansionary fiscal policy should be used during a recession – when there is …
Readers Question: what are the advantages and disadvantages of inflation? Inflation occurs when there is a sustained increase in the general price level. Traditionally high inflation rates are considered to be damaging to an economy. High inflation creates uncertainty and can wipe away the value of savings. However, most Central Banks target an inflation rate …
A bank is a financial institution which is involved in borrowing and lending money. Banks take customer deposits in return for paying customers an annual interest payment. The bank then uses the majority of these deposits to lend to other customers for a variety of loans. The difference between the two interest rates is effectively …