Readers’s question: What is the difference between depreciation and inflation? Depreciation refers to a fall in the value of an asset. A depreciation of the exchange rate means a currency becomes worth less than others. For example, the Pound sterling falls in value against the dollar/euro/Yen. This graphs shows that the value of the Pound …
Readers Question: would you please explain to me how we can have no inflation, or low inflation if the government injects two or three trillion dollars in the US economy and output falls? This is an interesting question. Although printing more money tends to cause inflation, there are circumstances where you can increase the money …
A summary for understanding exchange rates. Factors that affect exchange rates and the impact of exchange rates on the economy. Terminology Depreciation/devaluation – fall in value of exchange rate – exchange rate becomes weaker (see also: definition of devaluation and depreciation) Appreciation – increase in the value of exchange rate – exchange rate becomes stronger. …
The effective exchange rate measures the value of a currency against a basket of other currencies. This exchange rate index is usually trade-weighted to take into account the relative importance of other currencies. When looking at the effective Sterling exchange rate we compare the value of Sterling against our main trading partners – The Euro, …
Summary – Periods of high inflation usually lead to lower returns on the stock market because higher inflation is likely to lead to higher interest rates, lower economic growth and lower dividends. Impact of high inflation on share prices If the inflation rate increases, this will make investors wary for a few reasons. Firstly, if …
Definition of Household savings ratio: The percentage of disposable income that is saved. (1) Total savings = Disposable income – Household consumption UK Saving Ratio Latest UK household savings ratio: 2021 = 10% But, by 2021 Q4 the saving ratio had fallen to 6.2% By contrast, the average savings ratio in the past 54 years …
Inflation measures how much the price of goods and services have increased over a period of time; and will have a significant impact on changes in the cost of living. An inflation rate of 5% means that on average the typical household basket of goods (e.g. food, TVs) and services (haircut, restaurant meal) is 5% …
Inflation is a sustained rise in prices and increase in the cost of living. The general costs of higher inflation will be reduced purchasing power of money, fall in the value of savings, a depreciation in the exchange rate, less certainty for firms and the inconvenience of dealing with changing prices. In addition, developing economies …