I asked my Economics students to conduct a questionnaire, asking people in the street various questions about Economics. One Question was: What do You consider to be the Most Serious economic problem Facing the UK at the moment. These are the most popular responses to far. House Prices (50% of responses) Government Debt Ignorance because …
Equilibrium national income occurs where aggregate supply equals aggregate demand. An increase in equilibrium national income requires an increase in long-run aggregate supply and aggregate demand. Equilibrium national income and Keynesian Consumption function We can also show equilibrium national income using a Keynesian consumption function. In this case, an increase in domestic aggregate demand (C+I+G) …
Graph showing Ratio of House prices to Incomes This graph shows an interesting increase in the ratio of house prices to income. It is well know that UK house prices have increased significantly since 1993. In some areas the house price increase has been at least 300%, since the early 1990s. However, since 1998, house …
Readers Question. Explain how interest rates could be used to boost the economy. Why, then do the govenment frequently hesitate to take such steps. Interesting Question. Generally, lower interest rates help increase consumer spending, investment and economic growth. Lower interest rates help increase Aggregate Demand for various reasons. Lower interest rates make borrowing cheaper encouraging …
About £77 billion was wiped from the value of leading FTSE 100 companies over fears of a US recession. The FTSE 100 index is now down to its lowest level in 19 months. In particular, stock markets were unimpressed by President Bush’s plan for tax cuts. In American politics tax cuts are often seen as …
Sticky inflation is an undesirable economic situation where there is a combination of stubbornly high inflation, (and often stagnant growth). Sticky inflation is often associated with cost-push factors, i.e. factors which cause a rise in the inflation rate but also lead to lower spending and economic growth. Sticky inflation is also sometimes known as Stagflation …
Back in March I wrote this essay – Is the US heading towards recession? According to some doom mongers the US is already in recession. They point to the ‘collapsing’ housing market and the rise in ‘repossessions’ The irony is that US economic growth has remained unexpectedly high at 4.9% in 3rd quarter of 2007. …
Readers Question Is tesco’s power a net benefit or a cost to the wider economy? In the UK, Tesco have over 32% of market share for supermarkets. It is a similar situation as the US, where supermarkets are dominated by Walmart. Tesco is now the largest private sector employer in Europe. (working for Tesco) It …