A look at the extent to which policy makers face a trade off between unemployment and inflation. The Phillips curve suggests there is a trade off between inflation and unemployment, at least in the short term. Other economists are more sceptical.
A positive economic statement is a statement that can be verified true or false. A normative economic statement is an opinion. It is a view that others may disagree with. Postive economics In the UK, Dec 2017 CPI inflation is 3.0% In the UK the rate of unemployment has increased by 50% in the past …
Interest rates have a strong influence on house prices, principally because changes in the interest rate affect the cost of mortgage payments. How do interest rates affect house prices? If interest rates rise it will have a significant effect on increasing the cost of mortgages. Higher mortgage payments will deter prospective home-buyers – it becomes …
Inflation – is defined as a persistent increase in the general price level. The inflation rate is a key statistic and has important consequences for industry. In particular, high rates of inflation often discourage investment and lead to lower long-term growth for the following reasons: How inflation affects industry Uncertainty. High and volatile inflation creates uncertainty …
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Readers Question: What is the difference between a recession and deflation? A recession is a period of negative economic growth. The official definition is a decline in output (Real GDP) for two consecutive quarters. Usually, in a recession, you will get a fall in the inflation rate. From 2010, there is a fall in the …
There are various economic costs associated with inflation – uncertainty, decline in investment, redistribution from savers to borrowers – but although there are costs with inflation, is zero inflation actually desirable? Governments usually set an inflation target of around 2%. (UK CPI target is 2% +/-1) There are reasons for targetting inflation of 2% – …
Readers Question: Will interest rates rise? Some say yes, my investment analyst/advisor says no (“because the UK is largely living on credit and the government and bank of England do not want a repeat of 2008”) Interest rates will rise when the Bank of England feel the economy has returned to a normal trend of …