Readers Question Discuss the view that the Phillips Curve is irrelevant in explaining the relationships between unemployment and inflation in the UK. The standard Phillips curve suggests there is a trade-off between unemployment and inflation. This relationship occurs because of the Keynesian view of the AD/AS diagrams. Diagram showing an increase in AD As AD …
Readers Question: Why do countries that experience a boom risk losing international competitiveness? An economic boom implies that an economy is growing above its long term trend rate. This means that the rate of economic growth is high, but there tend to be inflationary pressures because demand is growing faster than supply. The impact of …
In physics, escape velocity refers to the speed necessary to break free of gravitational field without further propulsion. For example, to leave the earth’s gravitational pull requires approximately 40,320 km/h, or 25,000 mph. This was first achieved in 1959 by Luna I. Very interesting, but what does escape velocity mean in relation economics? It refers to …
Frequently we hear the argument that there is no austerity in the UK. Government spending has even continued to rise during the recession. Some would even go so far as to say that the modest rise in government spending is proof that expansionary fiscal policy is a failure, and we should actually be cutting government …
The paradox of toil states that under certain conditions if people wish to work longer hours, this can cause falling real wages and rising unemployment. The paradox is that individuals have an incentive to work longer, but if everybody wants to work longer hours, it can actually cause unemployment. The paradox of toil only works …
I like this article about the wrong kind of inflation by Roger Bootle Or as his cleaner said: “It’s not the inflation they need to sort out, Mr Bootle, it’s the rising prices!” Essentially, the wrong kind of inflation is cost-push inflation. This inflation is due to rising costs of production, such as rising energy …
Recently, there has been much focus on US public sector debt – the total amount the government borrows. These graphs show the combined debt levels of both the public and private sector. Private sector debt is split up into households, non-financial companies and financial corporations. In the run up to the 2007 financial crash, we …
Interesting to read this from Lord Oakeshott, the Liberal Democrats’ former Treasury spokesman “The economy is as flat as a pancake. No growth means no progress in the Coalition’s central purpose of reducing the deficit. We Liberal Democrats did not sign up to stagflation and a vicious circle of self-defeating cuts. It is time to …