Readers question: What is the difference between tax and inflation? Tax is a way for the government to raise revenue. It includes charges placed by the government on goods/income. For example, VAT is a tax which means consumers have to pay an additional 20% of the price in the form of tax which goes to …
An inflation target means the Central Bank has the objective to use monetary policy in order to keep inflation close to an agreed level (e.g. 2%) If inflation is forecast to rise above the target, they are likely to increase interest rates to moderate demand and slow down inflationary pressures. If the Central Bank is …
What would be the impact of the US placing a tariff on the import of steel and aluminium into the US A tariff on imports of foreign steel would raise the price of imported steel and encourage US firms and consumers to buy domestically produced steel instead. At the moment, American producers find it cheaper …
A trade deficit occurs when the value of imports of goods and services is greater than the value of exports. For example, in 2016 the US exports totalled US$ 1,450,457 million. Imports totalled US$ 2,248,209 million. (WITS) Source: Trade balance at St Louis Fed. Since 1990, the US has run a persistent trade deficit. The …
Boom and bust economic cycles involve: Rapid economic growth and inflation (a boom), followed by: A period of economic contraction / recession (falling GDP, rising unemployment) Causes of boom and bust cycles 1. Loose Monetary Policy If monetary policy is too loose, it means real interest rates are too low given the state of the …
Q. How does the Bank of England decide and set interest rates? The Bank of England set the repo rate. This is sometimes known as the ‘base rate’. It is the interest rate at which commercial banks (like Lloyds and Natwest) borrow from the Bank of England. The Bank of England can control liquidity and …
The UK government has given the Bank of England an inflation target of CPI 2 % +/-1. The Bank of England is responsible for using monetary policy (e.g. interest rates) to achieve this goal of low inflation. But, as well as targeting inflation, the Bank of England also has a wider remit of considering objectives …
I’ve been studying economics for 13 years and I can still get confused at the bewildering array of interest rates. Basically, interest rates can range from anywhere between 0% and 2,316% The most important rate is the base rate (sometimes referred to as the repo rate). This is the rate set by the Bank of …