A graph showing net lending (+) and net borrowing (-) by sector in the UK economy. This shows how public borrowing is mirrored by a rise in private sector (household+corporate) saving. The two extremes are the financial crisis of 2009 and Covid lockdowns of 2021. In both cases, these events led to a rise in …
Recessions (a fall in real GDP) are primarily caused by a fall in aggregate demand (AD). A demand-side shock could occur due to several factors, such as A financial crisis. If banks have a shortage of liquidity, they reduce lending and this reduces investment. A rise in interest rates – increases the cost of borrowing …
Readers Question: Why is the cost of living in the UK so expensive? The cost of living depends on: The price of basic necessities – food, fuel, heating, transport, housing/rent, entertainment. The effective cost of living also depends on real wages. It is expensive to live in Nordic countries, but real wages tend to be …
External debt is the total public (government) and private debt owed to non-residents repayable in internationally accepted currencies, goods, or services. This is gross (total) external debt. It does not measure net debt. External debt is different to measures of public (government) debt. See: List of national debt by country. Some countries with very high …
The main sectors of the economy are: Primary sector – extraction of raw materials – mining, fishing and agriculture. Secondary / manufacturing sector – concerned with producing finished goods, e.g. Construction sector, manufacturing and utilities, e.g. electricity. Service / ‘tertiary’ sector – concerned with offering intangible goods and services to consumers. This includes retail, tourism, …
A look at the main causes of unemployment – including demand deficient, structural, frictional and real wage unemployment. Main causes of unemployment 1. Frictional unemployment This is unemployment caused by the time people take to move between jobs, e.g. graduates or people changing jobs. There will always be some frictional unemployment in an economy because …
Since the financial crisis, we have seen an unprecedented stagnation/decline in real wages. This decline has been most noticeable for low-income workers, with growing levels of inequality. The decline/stagnation in real wages is a global phenomenon – though some countries have been more affected than others. Reasons suggested for falling/stagnant wages since 2008 include: Recession …
Inflation means there is a sustained increase in the price level. The main causes of inflation are either excess aggregate demand (AD) (economic growth too fast) or cost-push factors (supply-side factors). Summary of the main causes of inflation Demand-pull inflation – aggregate demand growing faster than aggregate supply (growth too rapid) Cost-push inflation – For …