Recessions (a fall in real GDP) are primarily caused by a fall in aggregate demand (AD). A demand-side shock could occur due to several factors, such as A financial crisis. If banks have a shortage of liquidity, they reduce lending and this reduces investment. A rise in interest rates – increases the cost of borrowing …
Putting aside the very real human cost, war has also serious economic costs – damage to infrastructure, a decline in the working population, inflation, shortages, uncertainty, a rise in debt and disruption to normal economic activity. From some perspectives, war can appear to be beneficial in terms of creating demand, employment, innovation and profits for …
A look at the main causes of unemployment – including demand deficient, structural, frictional and real wage unemployment. Main causes of unemployment 1. Frictional unemployment This is unemployment caused by the time people take to move between jobs, e.g. graduates or people changing jobs. There will always be some frictional unemployment in an economy because …
Definition of experience effects When a single personal experience has a profound impact on future decisions by individuals. Example of experience effects 1. Bad experience never use the company again. A friend of mine was on an American Airlines flight when the wings caught fire. They had to make an emergency landing. As a result, …
Historical US Unemployment since 1900 Sources 1890-1920 data are from Christina Romer (1986). “Spurious Volatility in Historical Unemployment Data”, The Journal of Political Economy, 94(1): 1920-1930 Robert M. Coen (1973). “Labor Force and Unemployment in the 1920’s and 1930” 1930- 1948 Bureau of Labor Statistics, Employment Thanks to User Peace Generally, the US economy was …
An overvalued exchange rate implies that a countries currency is too high for the state of the economy. An overvalued exchange rate means that the countries exports will be relatively expensive and imports cheaper. An overvalued exchange rate tends to depress domestic demand and encourage spending on imports. An overvalued exchange rate can also be …
A historical look at US National debt from 1790 to 2021 The national debt is basically the amount the government owe to the private sector and other holders of US Treasuries. National debt is the accumulation of government borrowing over many years. The budget deficit is the annual amount the US government need to borrow …
‘Beggar my neighbour’ is a term used to describe an economic policy, where you seek to gain an economic advantage by making other countries lose out. Cutting corporation tax is an effort to take away investment from countries with higher corporation tax. It creates an incentive for countries to keep cutting to see who has …