One feature of the current economic malaise is that growth predictions for the UK economy have been consistently over-optimistic. For example, the Office for Budget Responsibility originally forecast economic growth of 5.7% between 2010 to mid 2012. The economy failed to meet this target, growing by just 0.9% during this period. To be fair to …
The fiscal multiplier looks at how much an initial change in injections affects real GDP. For example, if increased government spending of £1bn causes overall GDP to rise by £1.5bn, the multiplier effect is 1.5 If £1bn worth of tax rises causes real GDP to fall by £0.5bn, the multiplier effect is (0.5) Since 2009, …
Readers Question: What would happen if a major currency, such as the dollar gets backed by gold again? If a major currency was backed by gold it means the government must hold sufficient gold to convert representative money into gold at the promised exchange rate. It means that the country would not be able to increase the money …
Recently, there has been much debate about the direction of monetary policy. Should we make monetary policy ‘looser’ – expansionary monetary policy through quantitative easing / lower interest rates in order to boost growth and reduce unemployment. Or should we consider ‘tightening’ monetary policy – higher interest rates, no quantitative easing in order to reduce …
The Chancellor recently spoke on the Andrew Marr show. G.Osborne said of the UK economy: “We are getting on top of the deficit… They are difficult times for the British economy; it’s a difficult time for the world economy, but our economy is healing. We have to do more and we have to do it …
Readers Question: Whose is to blame for the continued UK recession? With the banking crisis and economic recession, politics seems to be currently dominated by a ‘blame’ game – trying to work out whose fault it is. Unsurprisingly, the coalition have tried to shift blame on to Euro crisis and banks. Others have blamed the …
A report by the Institute of Fiscal Studies suggests the NHS will need an extra £20 billion of funding by 2020. The NHS already accounts for 23% of government funding, and is one of the few departments to be protected from budget cuts. But, in the age of austerity, spending commitments imply flat real spending …
Italy has struggled to reduce national debt as a % of GDP since government debt has risen to over 100% of GDP in the late 1980s National Debt Italy Italy has the second highest public sector debt in Europe, after Greece. The IMF predict public sector debt of 123.4 % of GDP in 2012. By …