A budget surplus occurs when government tax receipts are greater than government spending. It means the government can either save money or pay off existing national debt. It is worth noting, that budget surpluses are quite rare in the past 120 years. Politicians have sometimes attempted to enshrine budget surplus into law but what are …
Readers Question: Interest Rates are increased by the governments to bring down inflation rates, this makes exports price competitive as well, as a result, exports increase. However, an increase in interest rates can lead to an appreciation of the currency as demand for the currency increases. So this again increases the price of exports as …
The trend rate of economic growth is the average sustainable rate of economic growth over a period of time. It is determined by growth in productivity.
A look at the extent to which policy makers face a trade off between unemployment and inflation. The Phillips curve suggests there is a trade off between inflation and unemployment, at least in the short term. Other economists are more sceptical.
Interest rates have a strong influence on house prices, principally because changes in the interest rate affect the cost of mortgage payments. How do interest rates affect house prices? If interest rates rise it will have a significant effect on increasing the cost of mortgages. Higher mortgage payments will deter prospective home-buyers – it becomes …
Interesting article here about the UK economy of the 1930s escaping from the Liquidity trap and Great Depression of the 1930s. This involved: Higher inflation target Low-interest rates and negative real interest rates. Devaluation (UK left Gold Standard in 1931) The article is also interesting for another reason, a short insight into the housing market …
Readers Question: In finance and economics, there are such things as “bubbles” in the economy. And when bubbles start forming, it normally isn’t a good thing. My question is, how many different kinds of “bubbles” are there? Such as the property bubble or stock market bubble. And how do they form and what are their …
Inflation – is defined as a persistent increase in the general price level. The inflation rate is a key statistic and has important consequences for industry. In particular, high rates of inflation often discourage investment and lead to lower long-term growth for the following reasons: How inflation affects industry Uncertainty. High and volatile inflation creates uncertainty …