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 …
The Balance of Payments is a record of a country’s transactions with the rest of the world. It shows the receipts from trade. It consists of the current and financial account. UK current account 1955-2018 1. Current account This is a record of all payments for trade in goods and services plus income flow it …
Readers Question: What does the Government spend its money on? The government spends money for a variety of reasons: Reduce inequality (welfare payments like unemployment benefit). Provide public goods (fire, police, national defence) Provide important public services like education and health (merit goods) Debt interest payments. Transport Military spending UK public sector spending 2023-24 …
The balance of payments is the record of a country’s transactions / trade with the rest of the world. The balance of payments consists of: Current Account (trade in goods, services + investment incomes + transfers) Capital Account / Financial Account (capital and financial flows, net investment, portfolio investment) Errors and omissions. It is hard …
Readers Question: What caused the massive decrease in the debt to GDP ratio for the UK following World War II? It is a good question to ask. In the past few years, many European policymakers have felt that rising debt levels needed panic levels of austerity/spending cuts. But, that didn’t happen in the UK in …
The fiscal multiplier effect occurs when an initial injection into the economy causes a bigger final increase in national income. For example, if the government increased spending by £1 billion but this caused real GDP to increase by a total of £1.7 billion, then the multiplier would have a value of 1.7. Example of how …
A current account deficit means the value of imports of goods/services / investment incomes is greater than the value of exports. It is sometimes referred to as a trade deficit. Though a trade deficit (goods) is only part of the current account. If there is a current account deficit, it means there is a surplus …
