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 …
What are the implications of an ageing population? An older population presents many challenges to labour markets, government tax, government spending and the wider economy. The Population Timebomb – How An Ageing Population Will Change UsWatch this video on YouTube One of the great achievements of the Twentieth Century is a dramatic rise in life …
Definition: Cost-push inflation occurs when we experience rising prices due to higher costs of production and higher costs of raw materials. Cost-push inflation is determined by supply-side factors, such as higher wages and higher oil prices. Cost-push inflation is different to demand-pull inflation which occurs when aggregate demand grows faster than aggregate supply. Cost-push inflation …
Readers Comment. Why doesn’t the Bank of England just print the money instead of borrowing the money? Printing more money doesn’t increase economic output – it only increases the amount of cash circulating in the economy. If more money is printed, consumers are able to demand more goods, but if firms have still the same …
Inflation is a period of rising prices. The primary policy for reducing inflation is monetary policy – in particular, raising interest rates reduces demand and helps to bring inflation under control. Other policies to reduce inflation can include tight fiscal policy (higher tax), supply-side policies, wage control, appreciation in the exchange rate and control of …
Inflation is generally controlled by the Central Bank and/or the government. The main policy used is monetary policy (changing interest rates). However, in theory, there are a variety of tools to control inflation including: Monetary policy – Higher interest rates reduce demand in the economy, leading to lower economic growth and lower inflation. Control of …
In 2022, the UK economy is struggling with very weak economic growth and one of the highest inflation rates in the OECD. Some of these problems can be attributed to global short-term problems, in particular recovery from Covid lockdowns and rising oil prices which have caused the worst cost-push inflation since the 1970s. However, short-term …
Readers Question: Why was inflation higher in the 1970s? In 2022, inflation has increased in western Europe to the highest levels for many years. With inflation in UK and US approaching 10%. Yet, despite rising oil prices and other inflationary pressures, inflation is still considerably lower than in the 1970s. A big question is whether …