Secular stagnation is a term coined to describe a prolonged period of lower economic growth. Economists, such as Larry Summers have written on secular stagnation arguing the world has entered a period of substantially lower economic growth. He points to factors, such as ineffective monetary policy and weak demand for explaining the lower rates of …
Inflation is a continuous rise in the price level. Inflation means the value of money will fall and purchase relatively fewer goods than previously. In summary: Inflation will hurt those who keep cash savings and workers with fixed wages. Inflation will benefit those with large debts who, with rising prices, find it easier to pay …
Reader’s Question: Why does printing money cause inflation? Does this always occur? Summary If the money supply increases faster than output then, ceteris paribus, inflation will occur. If a government prints extra money, households will have more cash and more money to spend on goods. But, if the amount of goods stays the same, the …
Exchange rates are determined by factors, such as interest rates, confidence, the current account on balance of payments, economic growth and relative inflation rates. For example: If US business became relatively more competitive, there would be greater demand for American goods; this increase in demand for US goods would cause an appreciation (increase in value) …
Despite unprecedented economic sanctions imposed on Russia, the Russian Rouble has become the best performing currency in the world. Rising 30% in the year 2022 to 26 May 22 (source: Reuters) After the initial sanctions and freezing of Russian foreign currency reserves, the Russian rouble fell 25%. But, since then the Rouble has performed a …
Reader’s Question: The Central bank is raising interest rates (I understand why). At the same time, the government is being called to reduce taxes. These appear contradictory policies to me? What am I missing? In summary You are right they tend to have opposite impacts on consumer spending and economic growth. Higher interest rates tend …
Current UK Inflation Rate CPI inflation rate: 2.3% (headline rate) CPI – D7G7 at ONS Source: Raw data General inflation tables | CPI annual % change D7G7 at ONS Other measures of inflation (CPIH) CPI including owner occupiers’ housing costs – 6.2% (CPIH – L550) See: Measures of inflation Reasons for low inflation in …
Readers question: Keeping a lower deficit of the National Budget would benefit Americans as interest rates would remain stable and allow new businesses to grow. Would you say this statement is correct? In theory, there is an argument that a rising deficit can cause a rise in bond yields and interest rates. Similarly, there is …