Readers Question: Does Government debt matter? Do high fiscal deficits threaten economic stability? Summary Many worry that high levels of government debt could cause economic instability. In certain occasions, countries with high debt have seen investors lose confidence, leading to higher bond yields and putting pressure on the government to slash spending, for example, several …
Expansionary monetary policy aims to increase aggregate demand and economic growth in the economy. Expansionary monetary policy involves cutting interest rates or increasing the money supply to boost economic activity. It could also be termed a ‘loosening of monetary policy’. It is the opposite of ‘tight’ monetary policy. When to pursue expansionary monetary policy The …
Definition of ‘Trade not aid’ This is the economic idea that the best way to promote economic development is through promoting free trade and not providing direct foreign aid. Logic of ‘Trade not Aid’ A culture of dependency. Foreign aid to developing economies is invariably wasteful and can create a culture of dependency. Also, recipients of …
A list of the major recessions in UK and US. List of Recessions in UK Comparing different recessions 1919-21 Recession GDP fell 25% during the three years following the end of the First World War. Unemployment rose to 20% UK experienced deflation of 10% in 1921, and 14% in 1922 Causes of fall in GDP …
Monopsony occurs when there is one buyer and many sellers. In the labour market, a monopsony occurs with one employer and many workers wanting to gain employment. Arguably, monopsony power enables firms to ‘exploit’ workers by setting lower wages and employing fewer workers than in a competitive market. To visualise monopsony power, we could think …
In the 1930s, George Orwell volunteered to spend time down a coal mine to find what life was like for coal miners. For the six foot, middle class, old Etonian, the experience of going down a mine was a real shock. The experience left him sore and full of admiration for those who worked down …
Disposable income is the amount of personal income – direct taxes. Example: In the UK, a person may have a gross salary of £31,000. But, after income tax and NI contributions have been taken off, their disposable income may be £19,000 a year. Discretionary income is the income available to spend. It is disposable (after …
Many Western economies face a demographic time bomb – an ageing population, which places strain on government spending and the welfare state. To deal with this situation, governments face several difficult choices – Raise taxes to pay for pensions, Shift the emphasis on to the private sector provision of pensions, Raise the retirement age Cut …