Readers Question: I have been interested in the US economy in the last few months, and with current news of their $14 trillion debt problem heating up, I’m wondering could the demand for dollars go down, if they were possible to have a similar or close problems of debt issues like Greece, and if the …
A two speed Europe refers to how, within the EU, economies are growing at different rates and are at different stages in the business cycle. For example, countries in the core of the Eurozone (Germany, Netherlands, France) have seen relatively good recovery since the recession. In these countries, unit labour costs have remained competitive, enabling …
Readers Question: On Jan 2009 I asked a question on the greek current account deficit, the fixed EUR rate, the lack of competitiveness and the debt load and you expanded brilliantly on the dangers of the twin deficits and the deteriorating Greek credit quality. Now I just need to make a comment that all the …
Can Governments Increase the Rate of Economic Growth? Governments often seek to increase the rate of economic growth. Higher growth rates improve public finances, increase economic welfare and help reduce unemployment. However, it is debatable how much the government can actually increase the rate of economic growth. The greatest potential for increasing economic growth occurs …
Lovely organic vegetables, but will anybody be buying them in a period of falling real incomes? It seems we like our organic food, but only when incomes are rising. During the period of strong economic growth in the mid naughties, sales of organic food grew by up to 30% a year. However, last year demand …
Source: ONS This graph shows how inflation rates for different categories can vary enormously. Firstly, gas and electricity prices are by far the most volatile. This reflects the volatile nature of supply, it also reflects the fact demand and supply are inelastic. See: volatile food prices for the economic theory behind this volatility. Despite the …
In economics, there is often a trade off between macro economic variables. A simple trade off could be – increase interest rates; this leads to lower inflation, but also lower output. Cut interest rates, and you help boost growth, but increase inflation. In an ideal world, we would have low inflation, high growth and full …
Readers Question: From the current economic crises government has been slashing its base interest rates to now 2%. However, how would deflation which is currently being experienced in several countries mainly due to decreasing fuel prices affect the attempted recovery from this crisis? Deflation makes monetary policy much less effective. In fact, deflation can cause …