Readers Question: Does inflation causes unemployment? There are a few different scenarios where inflation can cause unemployment. However, there is not a direct link. Often we will notice a trade-off between inflation and unemployment – e.g. in a period of strong economic growth and falling unemployment; we see a rise in inflation – see Phillips …
Is there a link between government debt and the interest rate on government bonds? One argument we often hear is that if government borrowing increases – we can expect higher bond yields. Investors demand higher yields to compensate for the risk of government default. However, other economists argue this is misleading. If inflation is low, …
Demand-pull inflation is a period of inflation which arises from rapid growth in aggregate demand. It occurs when economic growth is too fast. If aggregate demand (AD) rises faster than productive capacity (LRAS), then firms will respond by putting up prices, creating inflation. Inflation – a sustained increase in the price level. Demand-pull inflation – …
A look at how interest rates and inflation affect the exchange rate – in short, higher interest rates tend to cause an appreciation in the exchange rate. Readers Question: In currency investing, would it be more profitable to invest in a country with high-interest rates and high inflation, or low to zero interest rates with …
With UK interest rates close to zero, who benefits from low-interest rates? In summary, the main effects of low-interest rates are: Savers will get lower interest payments on their savings. Borrowers, especially mortgage owners will see lower interest payments on their debt, increasing discretionary income. The government can borrow from the private sector at a …
UK unemployment rates since 1881. This shows the fluctuations in unemployment over the past 100 years in the UK. Measuring unemployment is not a precise science. This data mostly relies on administrative statistics on the number claiming some kind of unemployment insurance. The government is changing how unemployment is measured. You can view the pdf …
Inflation means a sustained increase in the general price level. The main two types of inflation are Demand-pull inflation – this occurs when the economy grows quickly and starts to ‘overheat’ – Aggregate demand (AD) will be increasing faster than aggregate supply (LRAS). Cost-push inflation – this occurs when there is a rise in the …
Inflation is a measure of changes in the cost of living. It is calculated by using statistics such as Consumer Price index CPI, retail price index RPI. However, the official inflation rate doesn’t include every price and some consumers may experience different inflation rates. For example, if the price of basic food items increases 50%, …