A helicopter money drop is a form of monetary policy in which a Central Bank prints money and distributes it directly to households/consumers. The aim of helicopter money is to boost nominal GDP, overcome deflation and help reduce unemployment. In normal circumstances, printing money will be inflationary. Economists usually suggest helicopter money in a liquidity …
Recent unemployment data from the US shows a sharp fall in the unemployment rate. EU unemployment remains stuck at 11.4% – the highest since the introduction of the Euro in 1999. The diverging unemployment rates highlight the different stages of economic recovery between the two economic zones. However, sluggish EU recovery and a continued EU …
The fiscal multiplier looks at how much an initial change in injections affects real GDP. For example, if increased government spending of £1bn causes overall GDP to rise by £1.5bn, the multiplier effect is 1.5 If £1bn worth of tax rises causes real GDP to fall by £0.5bn, the multiplier effect is (0.5) Since 2009, …
Readers Question: What would happen if a major currency, such as the dollar gets backed by gold again? If a major currency was backed by gold it means the government must hold sufficient gold to convert representative money into gold at the promised exchange rate. It means that the country would not be able to increase the money …
Readers Question: What should the government do to improve the American standard of living? How could the President + Congress, make the biggest difference to improving American standards of living in the long run? These are a few policies which I feel would improve US living standards. 1. Reduce Unemployment. The rise in US unemployment …
Recently, I posted about the current fall in M4 lending in the UK. The concern is that fears over possible future inflation are preventing decisive action to promote economic recovery. But, these fears are misplaced. The fall in M4 lending in the UK is a sign of a fundamental weakness in demand. Given this weakness, …
Readers Question: if the production of food crops is increasing at a diminishing rate what factors of demand can reverse this trend. Increasing at a diminishing rate implies that agricultural output is struggling to grow – despite more fertilisers and capital investment. Diminishing returns means that as we employ more factors of production – the …
Recently, there has been much debate about the direction of monetary policy. Should we make monetary policy ‘looser’ – expansionary monetary policy through quantitative easing / lower interest rates in order to boost growth and reduce unemployment. Or should we consider ‘tightening’ monetary policy – higher interest rates, no quantitative easing in order to reduce …