The accelerator effect examines the effect on levels of investment from a change in economic output (or demand for a product). The simple accelerator model suggests that capital investment is a function of output. If there is an increase in demand and economic output, investment will rise to meet the expected demand. The simple accelerator …
There have been numerous economic predictions springing from a possible Brexit including recession, unemployment, falling Pound, falling stock markets, collapsing house prices, inflation and the end of civilisation as we know it (I’ll leave predictions of world wars e.t.c. for someone else to grapple with). But, what is the economic theory behind these economic predictions? …
Readers Question – When a war brakes out in the middle east, the price of petrol rises, and the price 0f a used Ford Falcon falls why? When a war breaks out in the middle east, there is likely to be disruption to the supply of oil. 50% of our oil comes from the middle …
Readers Question: But what happens to the balance of payments in a recession? (from: What happens in a recession) In a recession, the current account is likely to show an improvement (reduction in deficit). This is because: In a recession consumer spending falls, therefore spending on imports decreases. In a recession, interest rates are cut. …
In the past decade there has been a divergence between house prices in different parts of the UK. In particular, house prices in London and surrounding areas has rocketed to unprecedented levels. Source: ONS According to the ONS, average mix-adjusted house prices in September 2015 stood at £299,000 in England, £175,000 in Wales, £199,000 in …
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Readers Question: How do bond spreads affect the value of the Dollar or Euro? A bond yield refers to the interest payment that you receive from holding the bond yield. If the yield is 4%, you can expect £4 a year from a £100 bond. A bond spread refers to the differences in bond yields. …
A look at the relationship between inflation and unemployment and whether there is a trade off as suggested by Phillips Curve.