The Bank of England set the base rate. The base rate is the rate at which they charge commercial banks to borrow from the Bank of England. In normal economic circumstances, this base rate will influence all the interest rates set by other banks and financial institutions. If the Bank of England cut the base …
Readers Question: Evaluate the advantages and disadvantages of both a floating exchange rate and a fixed exchange rate. Is there a “better” one to have? A fixed exchange rate occurs when a currency is kept at a certain level compared to other currencies. In practice, many of them are semi-fixed exchange rates like the Exchange …
Readers Question: I was really hoping you might be able to inform me of the effects that zero inflation (which the UK is currently experiencing) might have on aggregate demand in the economy? Firstly, this post will help consider the impact of zero inflation on AD and economic growth – Is zero inflation a good …
In the UK, there are quite a few different measures of inflation. All measures seek to show the annual change in living costs. However, different measures of inflation give different inflation figures. For example, RPI can often give a higher rate of inflation than CPI. CPI can also be misleading. For example, an increase in VAT …
Readers question: should the government focus on achieving a particular macroeconomic objective over the others? This is a good question. There is a lot that can be said because it encompasses so many different topics. Firstly, the three main macro-economic objectives: Higher economic growth Low inflation Low unemployment There are also less important objectives Reducing …
Greece is a very good example of the damage of austerity can do to both economies and the social fabric of a country. Firstly Greek austerity is almost unprecedented in its scope and intensity. Greece government spending and revenue Greek government spending was cut from €120 bn in 2008 to €90 bn in 2014. To …
Bank of England base interest rates are currently 0.5%. Economists are divided about when interest rates will rise. Some point to the evidence of a strong economic recovery to suggest interest rates could rise by mid 2015. Others argue that the strong global deflationary pressures mean that UK inflation is likely to stay very low …
In the UK, smoking rates have fallen significantly in the past 40 years. A combination of factors have led to declining smoking rates. Higher tax Health campaigns warning about the dangers of smoking. Regulations to ban smoking in many public areas, making smoking less attractive. Changing social attitudes and decline in the fashionability of smoking. …