Readers Question: Interest Rates are increased by the governments to bring down inflation rates, this makes exports price competitive as well, as a result, exports increase. However, an increase in interest rates can lead to an appreciation of the currency as demand for the currency increases. So this again increases the price of exports as …
The trend rate of economic growth is the average sustainable rate of economic growth over a period of time. It is determined by growth in productivity.
Readers Question: In finance and economics, there are such things as “bubbles” in the economy. And when bubbles start forming, it normally isn’t a good thing. My question is, how many different kinds of “bubbles” are there? Such as the property bubble or stock market bubble. And how do they form and what are their …
Summary – If a country has a higher inflation rate than its competitors, then its good will be increasing in price at a faster rate and therefore, they will become relatively less competitive. It will experience less demand for its exports and therefore less demand for its currency. This will tend to cause a depreciation …
All economic forecasts are subject to margins of error. This is because: There are many variables affecting the economy. For example, the role of shadow banking was largely ignored in 2007 forecasts but failed sub-prime mortgage debt had a much bigger impact on the wider economy than ever before. There is always a big element …
Aggregate supply is the total value of goods and services produced in an economy. The aggregate supply curve shows the amount of goods that can be produced at different price levels. When the economy reaches its level of full capacity (full employment – when the economy is on the production possibility frontier) the aggregate supply …
The market supply curve shows the combined quantity supplied of goods at different prices. The market supply curve is the horizontal sum of all individual supply curves. Linear Supply curve A linear supply curve can be plotted using a simple equation P = a + bS a = plots the starting point of the supply …
In recent years, major companies have seen a significant rise in cash reserves. These are profits which are not reinvested or distributed to shareholders but effectively saved. The largest cash reserves are found amongst major US IT companies, such as Apple, Microsoft and Google. These cash reserves have significant implications for economic welfare and income …