A budget deficit is the annual shortfall between government spending and tax revenue. The deficit is the annual amount the government need to borrow. The deficit is primarily funded by selling government bonds (gilts) to the private sector. Summary of effects of a budget deficit Rise in national debt Higher debt interest payments Increase in …
Wage growth is a key factor in determining living standards, aggregate demand and inflation. If wages increase faster than inflation, then households will be able to afford more goods and services. Real wage growth = nominal wage growth – inflation. In the post-war period, apart from short-lived recessions, real wage growth has been positive, growing …
Readers Question: Does rising interest rates always result in a fall in house prices? No. It doesn’t always cause a fall in house prices. But, looking at historical data, when there is a sustained and significant rise in interest rates, it is very likely house prices will fall. For example, the 1981 and 1991 house …
Is net positive migration a factor behind the UK’s recent rise in house prices? Given the rapid rise in house prices since the mid-1990s and the corresponding rise in the number of immigrants, it is hard to avoid the conclusion that levels of net migration are having, at least, some effect on exacerbating the UK …
Reader’s Question: The Central bank is raising interest rates (I understand why). At the same time, the government is being called to reduce taxes. These appear contradictory policies to me? What am I missing? In summary You are right they tend to have opposite impacts on consumer spending and economic growth. Higher interest rates tend …
Current UK Inflation Rate CPI inflation rate: 2.3% (headline rate) CPI – D7G7 at ONS Source: Raw data General inflation tables | CPI annual % change D7G7 at ONS Other measures of inflation (CPIH) CPI including owner occupiers’ housing costs – 6.2% (CPIH – L550) See: Measures of inflation Reasons for low inflation in …