In the past two decades, the UK has experienced a steady flow of net migrants into the economy. The 2016 Brexit vote has led to a sharp fall in net EU migration, but to a large extent this has been offset by a rise in non-EU migration. This net migration has had a wide-ranging impact …
Investment is expenditure on capital goods – for example, new machines, offices, new technology. Investment is a component of Aggregate Demand (AD) and also influences the capital stock and productive capacity of the economy (long-run aggregate supply) Summary – Investment levels are influenced by: Interest rates (the cost of borrowing) Economic growth (changes in demand) Confidence/expectations …
Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand. It occurs when economic growth is too fast. If aggregate demand (AD) rises faster than productive capacity (LRAS), then firms will respond by putting up prices, creating inflation. Inflation – a sustained increase in the price level. Demand-pull inflation – …
The broken window fallacy states that if money is spent on repairing the damage, it is a mistake to think this represents an increase in economic output and economic welfare. If money is spent on repairing a broken window, the opportunity cost is that individuals cannot spend money on more productive goods. The broken window …
Readers Question: explain how economists define ‘full employment’? The first definition of full employment would be the situation where everyone willing to work at the going wage rate is able to get a job. This would imply that unemployment is zero because if you are not willing to work then you should not be counted …
There are many areas of economics where respected economists may take up contrary opinions. Some of the main macroeconomic controversies include Keynesian vs Monetarist views on managing the economic cycle (role of fiscal policy) Real business cycle theories – the argument the economic cycle comes from supply, not demand. Whether there is a trade-off between …
In the post-war period, the UK labour market has seen many fundamental changes. In particular, we have seen a decline in full-time manual labour manufacturing jobs, and a growth in labour market flexibility. The current labour market is more diverse with more people working in self-employment, part-time jobs, zero hour contracts. De-industrialisation Since the early …
Household saving is defined as income that is not consumed. Savings can be kept in cash form, saved in a bank account or saved in long-term assets, such as government bonds. Quick summary of factors that influence saving levels Interest rates – higher interest rates make saving more attractive. Rising income enables higher savings. People …