Readers Question: Do you think the help to buy scheme is fuelling a housing bubble? Only about 3% of houses are bought through this method but do you think that it is likely that a bubble will develop? In a way, I think you answer the question yourself in stating that only 3% of houses …
Readers Question: How does a current account surplus change demand in an economy? A current account surplus means that the value of exports is greater than the value of imports (of goods and services). Net exports is a component of Aggregate demand. (AD) = C+I+G+(X-M). Therefore a current account surplus means that the net exports …
Readers Question: When would you want to own a business that sells price-elastic products? Why? Price elastic products mean that if there is an increase in price, there will be a bigger % fall in demand. Therefore, with elastic goods, there is little incentive to increase the price because there will be a bigger % …
In the early 1980s, housing was around 4 times income, but today, a buyer will need 8 times their income. Young people cannot afford to buy, with average deposits running at over £60,000. Renting has also soared in recent years, with average rents nearly £1,400 a month in England, and £2,200 in London. In the …
The current account on the balance of payments measures the inflow and outflow of goods, services, investment incomes and transfer payments. The main components of the current account are: Trade in goods (visible balance) Trade in services (invisible balance), e.g. insurance and services Primary income account – includes – compensation of employees, investment income from …
As the chancellor Kwasi Kwarteng was announcing his radical budget of energy bailout, and tax cuts for corporations and high-income earners, the markets took a dim view. Sterling fell and bond yields on government debt rose as investors sold UK bonds in response to the deteriorating outlook. Uniquely for such a large change of …
In recent months, the Pound Sterling has fallen against the dollar to levels not seen since 1985. This reflects long-term concerns about the UK economy, Brexit, the winter energy crisis and concerns about an imminent recession. The pound has fallen 16% this year, and the last month was the worst since 2016. The Pound is …
In theory, there is a strong link between the money supply and inflation. If the money supply rises faster than real output, then prices will usually rise. This means if a Central Bank prints more money, we will often (though not always!) get higher inflation. Explanation of why increased money supply causes inflation The money …