Thursday, May 03, 2007
Farewell from Sam
The end of term has come, and Sam now looks forward to a well-earned vacation. He hopes you have enjoyed this semester's blogs, and wishes you all the best in your examinations!
Did you know? LiveEcon's tutorials constitute an excellent revison tool - reminding you of key concepts, theories and applications. Find out more at www.liveecon.com
The end of term has come, and Sam now looks forward to a well-earned vacation. He hopes you have enjoyed this semester's blogs, and wishes you all the best in your examinations!
Did you know? LiveEcon's tutorials constitute an excellent revison tool - reminding you of key concepts, theories and applications. Find out more at www.liveecon.com
Tuesday, May 01, 2007
Euro hits record highs
The topics of today’s Blog are covered in LiveEcon:
Chapter 13 on exchange rates
Chapter 11 on monetary policy
The euro hit a record high against the dollar last week. The euro has reached its highest rate against the yen since the European currency was launched in 1999. The euro rose as high as 163.31 yen on expectations that the European Central Bank (ECB) would raise its interest rates in the coming months. There were further signs of strength in the euro zone in German unemployment figures. Headline unadjusted unemployment fell to 3.967 million in April - the lowest for more than four years The euro also hit a record high against the US dollar last Friday after disappointing figures for US growth.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6610511.stm
As unemployment falls and inflation rises, the anticipation is that central banks will begin to consider increasing interest rates. Higher interest rates in comparison to other countries will tend to lead to an improvement in the capital account and balance of payments surplus. In turn, this will tend to cause the exchange rate to appreciate (the exchange rate will "stengthen" - but of course this means that the country's exports will become less competitive). This appears to be happening in the eurozone viz a viz both the US and Japan at present.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For example, Chapter 13 examines the way exchange rates work, while chapter 11 examines the effect of monetary policy. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The topics of today’s Blog are covered in LiveEcon:
Chapter 13 on exchange rates
Chapter 11 on monetary policy
The euro hit a record high against the dollar last week. The euro has reached its highest rate against the yen since the European currency was launched in 1999. The euro rose as high as 163.31 yen on expectations that the European Central Bank (ECB) would raise its interest rates in the coming months. There were further signs of strength in the euro zone in German unemployment figures. Headline unadjusted unemployment fell to 3.967 million in April - the lowest for more than four years The euro also hit a record high against the US dollar last Friday after disappointing figures for US growth.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6610511.stm
As unemployment falls and inflation rises, the anticipation is that central banks will begin to consider increasing interest rates. Higher interest rates in comparison to other countries will tend to lead to an improvement in the capital account and balance of payments surplus. In turn, this will tend to cause the exchange rate to appreciate (the exchange rate will "stengthen" - but of course this means that the country's exports will become less competitive). This appears to be happening in the eurozone viz a viz both the US and Japan at present.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For example, Chapter 13 examines the way exchange rates work, while chapter 11 examines the effect of monetary policy. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Thursday, April 26, 2007
China beats US as Japan’s trade partner
Sam’s bedtime reading? The topics of today’s Blog are covered in LiveEcon:
Sam’s bedtime reading? The topics of today’s Blog are covered in LiveEcon:
Chapter 13 on the foreign exchange market and the BP curve.
Chapter 14 on the IS-LM model in the open economy.
China has officially displaced the US as Japan’s largest trading partner, figures revealed on Wednesday. Trade with China soared in the fiscal year ended last month, with Japanese exports growing 21 per cent, almost double the growth of exports to the US. The record China figure reflected high demand for Japanese manufacturing inputs and greater shipments of finished products. This comes as Japan’s trade surplus soared 16.4 per cent, following a 31.4 per cent drop the previous year. Japan’s trade surplus was particularly high in March, growing 73.9 per cent, to Y1,633.5bn ($13.8bn, €10bn, £6.9bn), as imports slowed sharply while exports remained strong, especially in the car sector. The strong figures were supported by lower oil prices and the weak yen. Japan’s trade surplus is expected to continue on a firming trend, despite slower economic activity in the US.
Read the full story at:
http://www.ft.com/cms/s/a194348e-f340-11db-9845-000b5df10621.html
According to the Mundel-Fleming model, the major determinants of a country’s exports are the level of foreign national income and the exchange rate (defined as the price of the domestic economy’s currency in terms of one unit of foreign currency). In the case of Japan, the rapid economic expansion experienced by China in recent years has led to an increase in the amount of Japanese exports to that country. This has been aided by the weak yen, which has made the foreign currency price of Japanese goods lower relative to the price of goods in Japan’s major trading partners. The weakness of the yen has triggered concern in some quarters but the international reaction so far has been subdued, as it is widely accepted that an appreciation of the yen would potentially jeopardise the recent signs of economic recovery in Japan.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For example, Chapters 13 and 14 outline what are the determinants of a country’s current account and illustrate the effect of changes in foreign incomes and exchange rates on the trade balance and overall level of national income. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Wednesday, April 25, 2007
Bank of England envisages 'sharp' inflation drop
Ever wondered about Sam’s nocturnal activities? The topics of today’s Blog are covered in LiveEcon:
Chapters 6 and 11 on monetary policy.
Chapters 7 and 15 on inflation.
Governor Mervyn King said that there could be a "sharp" decline in the UK's rate of inflation over the next four to six months. Interest rates were left unchanged at 5.25% earlier this month. Many analysts are predicting that interest rates will increase in May after house price growth has continued. UK house prices had risen because of low interest rates and limited supply. However, lower energy costs and higher borrowing costs probably would led to slower price growth in coming months.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6587253.stm
Inflation has recently surged to over 3%, substantially in excess of the 2% target. In deciding whether or not to raise interest rates to slow price growth, the Bank exercised caution last month, and left interest rates unchanged. To some extent rises in energy prices and house prices have contributed to the high levels of inflation, but energy prices have now started to fall and as cuts feed through to the consumer, the pressure on prices should ease.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For example, Chapters 6 and 11 look in some depth at monetary policy, and chapters 7 and 15 look at the causes and consequences of inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Ever wondered about Sam’s nocturnal activities? The topics of today’s Blog are covered in LiveEcon:
Chapters 6 and 11 on monetary policy.
Chapters 7 and 15 on inflation.
Governor Mervyn King said that there could be a "sharp" decline in the UK's rate of inflation over the next four to six months. Interest rates were left unchanged at 5.25% earlier this month. Many analysts are predicting that interest rates will increase in May after house price growth has continued. UK house prices had risen because of low interest rates and limited supply. However, lower energy costs and higher borrowing costs probably would led to slower price growth in coming months.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6587253.stm
Inflation has recently surged to over 3%, substantially in excess of the 2% target. In deciding whether or not to raise interest rates to slow price growth, the Bank exercised caution last month, and left interest rates unchanged. To some extent rises in energy prices and house prices have contributed to the high levels of inflation, but energy prices have now started to fall and as cuts feed through to the consumer, the pressure on prices should ease.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For example, Chapters 6 and 11 look in some depth at monetary policy, and chapters 7 and 15 look at the causes and consequences of inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Monday, April 23, 2007
Is the China effect over?
For the last few years, the biggest risk to the strong performance of UK economy has been inflation. But the risk has long been that we would discover that underneath our strong economy, was brewing some hidden inflationary pressure. If that emerged, it would imply that some of our recent economic success had been built on shaky foundations: it would mean that interest rates had perhaps been "too low", that the borrowing we have done on the back of low interest rates was less affordable than we thought, that the house prices we have paid on the back of easy borrowing are unsustainably high, and that any sense of consumer wealth deriving from higher house prices is a mere illusion. Well, has this inflationary pressure now materialised, or is today's 3.1% rate just a blip? Certainly it could be a blip as inflation is volatile at the moment, largely as a result of energy price swings. So we have to see through that volatility and ask where inflation will settle. That should be well below three percent, but there is still room for concern.
It all comes down to the China effect. In recent years, our economy has been dependent on deflating imported goods prices. To some extent, we've been able to enjoy simultaneous fast domestic growth, strong consumer spending and low inflation, because the prices of manufactured goods have been falling each year. If the flow of cheap imports dries up, either because the Chinese export prices rise or because our exchange rate falls, then we have to adjust the domestic economy to slower growth and restrained consumer spending. One theory is these are going up in price now, as we've reach the end of the gains to be derived from out-sourcing our factories. When there are no more factories to send abroad, there are no more cost-savings to be found in manufactured goods prices. The other factor to watch is the exchange rate. It has been relatively high, and in recent days strengthening against the dollar. As most Chinese imports are priced in dollars, they are going to get cheaper not more expensive when converted into pounds. But unless the pound rises forever against the dollar - which is unlikely - the exchange rate provides just temporary shelter against import price rises. Don't learn to rely on it.
Read the full story at: http://www.bbc.co.uk/blogs/thereporters/evandavis/
Evan's blog entry raises a number of important issues: the UK boom may be built on unsustainable levels of borrowing, aided and abetted by cheap imports (in turn helped by a "stronger" pound). A "stronger pound" (a rise in the exchange rate defined as the foreign price of domestic currency) makes imports cheaper and exports less competitive. This worsens the domestic trade balance (see http://news.bbc.co.uk/2/hi/business/6547937.stm for some background on this). As the Chinese economy develops, and/or if the pound weakens, import prices rise, and this feeds through into domestic inflation.
The much acclaimed new interactive learning package LiveEcon can help you undertand the economics behind these important policy events. For example, Chapter 13 looks in depth about the effects of exchange rate movements on the economy as a whole. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
For the last few years, the biggest risk to the strong performance of UK economy has been inflation. But the risk has long been that we would discover that underneath our strong economy, was brewing some hidden inflationary pressure. If that emerged, it would imply that some of our recent economic success had been built on shaky foundations: it would mean that interest rates had perhaps been "too low", that the borrowing we have done on the back of low interest rates was less affordable than we thought, that the house prices we have paid on the back of easy borrowing are unsustainably high, and that any sense of consumer wealth deriving from higher house prices is a mere illusion. Well, has this inflationary pressure now materialised, or is today's 3.1% rate just a blip? Certainly it could be a blip as inflation is volatile at the moment, largely as a result of energy price swings. So we have to see through that volatility and ask where inflation will settle. That should be well below three percent, but there is still room for concern.
It all comes down to the China effect. In recent years, our economy has been dependent on deflating imported goods prices. To some extent, we've been able to enjoy simultaneous fast domestic growth, strong consumer spending and low inflation, because the prices of manufactured goods have been falling each year. If the flow of cheap imports dries up, either because the Chinese export prices rise or because our exchange rate falls, then we have to adjust the domestic economy to slower growth and restrained consumer spending. One theory is these are going up in price now, as we've reach the end of the gains to be derived from out-sourcing our factories. When there are no more factories to send abroad, there are no more cost-savings to be found in manufactured goods prices. The other factor to watch is the exchange rate. It has been relatively high, and in recent days strengthening against the dollar. As most Chinese imports are priced in dollars, they are going to get cheaper not more expensive when converted into pounds. But unless the pound rises forever against the dollar - which is unlikely - the exchange rate provides just temporary shelter against import price rises. Don't learn to rely on it.
Read the full story at: http://www.bbc.co.uk/blogs/thereporters/evandavis/
Evan's blog entry raises a number of important issues: the UK boom may be built on unsustainable levels of borrowing, aided and abetted by cheap imports (in turn helped by a "stronger" pound). A "stronger pound" (a rise in the exchange rate defined as the foreign price of domestic currency) makes imports cheaper and exports less competitive. This worsens the domestic trade balance (see http://news.bbc.co.uk/2/hi/business/6547937.stm for some background on this). As the Chinese economy develops, and/or if the pound weakens, import prices rise, and this feeds through into domestic inflation.
The much acclaimed new interactive learning package LiveEcon can help you undertand the economics behind these important policy events. For example, Chapter 13 looks in depth about the effects of exchange rate movements on the economy as a whole. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Thursday, April 19, 2007
Chinese growth heating up economy
China's economy has grown by an annual rate of 11.1% in the first three months of 2007, official figures show, fanning fears it is starting to overheat. Separate figures showed annual inflation rose to 3.3% in March. China's main share index closed 4.5% lower amid concerns interest rates will have to rise to slow inflation because earlier measures have largely failed. "Investors are worried the government may take serious steps to rein in the economy, such as an interest hike plus some administrative measures," said Xu Yinhui, a fund manager at Guotai Junan Securities.
China's economy has grown by an annual rate of 11.1% in the first three months of 2007, official figures show, fanning fears it is starting to overheat. Separate figures showed annual inflation rose to 3.3% in March. China's main share index closed 4.5% lower amid concerns interest rates will have to rise to slow inflation because earlier measures have largely failed. "Investors are worried the government may take serious steps to rein in the economy, such as an interest hike plus some administrative measures," said Xu Yinhui, a fund manager at Guotai Junan Securities.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6570713.stm
The rapid growth of the Chinese economy in the past decade (China has grown by more than 10% in each of the past four years), has taken place on the back of high government spending, rising exports and increased foreign investment. All of these injections to the Chinese economy are stimulating growth by shifting the AD curve to the right. Nevertheless, this accelerating growth of GDP has raised concerns that the economy may now be ‘overheating’, in the sense that excess capacity has been used up, subsequently putting upward pressure on prices. The rising investment rate, though, should be contributing towards raising the Chinese economy’s long-run (steady-state) capital stock and output level.
The much acclaimed new interactive learning package LiveEcon can help you undertand the economics behind these important policy events. For example, Chapters 4 and 14 (at principles and intermediate level, repectively) explain how do injections in the open economy affect the aggregate level of demand, while Chapter 15 uses the AD-AS framework to explain how may overheating occur depending on the slope of the AS curve. Furthermore, Chapters 8 and 17 (also at principles and intermediate level) illustrate the long-term consequences of changes in the investment rate for the growth rate of the economy, using the well-known Solow growth model. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Wednesday, April 18, 2007
Pound reaches 26-year dollar high
Sterling has risen to its highest level against the dollar since 1981, breaking through the $2.010 mark. The currency rose above $2 on Tuesday after unexpectedly high UK inflation figures indicated further interest rate rises were likely. Consumer price inflation hit 3.1% in March, said the Office for National Statistics. Official figures also showed that average earnings rose at an annual rate of 4.6% over the three months to February, which is the fastest rate for almost three years.
Sterling has risen to its highest level against the dollar since 1981, breaking through the $2.010 mark. The currency rose above $2 on Tuesday after unexpectedly high UK inflation figures indicated further interest rate rises were likely. Consumer price inflation hit 3.1% in March, said the Office for National Statistics. Official figures also showed that average earnings rose at an annual rate of 4.6% over the three months to February, which is the fastest rate for almost three years.
For the first time, the Bank of England governor has had to write a letter explaining why inflation has climbed.
Read the full stories at:
On the appreciation of the pound:
http://news.bbc.co.uk/1/hi/business/6566715.stm
On the eminent rate hike as inflation jumps:
http://news.bbc.co.uk/1/hi/business/6562723.stm
On pay settlements “edging back up”:
http://news.bbc.co.uk/1/hi/business/6551829.stm
The above mentioned events illustrate the interdependence of the economic system, in particular between the goods, financial, foreign exchange and labour markets.
Following the announcement of an inflation rate that was higher than the official 2% target (which arose mainly due to energy price swings), expectations of higher UK interest rates increased the demand for the pound as investors looked to buy into assets that offered higher yields.
Investors expect an increase in the future UK interest rate, as the higher borrowing costs are likely to act as a tax on consumers, boosting loan repayment costs, taking money out of their pockets and slowing the rate at which they spend and take on extra financing.
In turn, while the stronger pound has been good news for British visitors to the US, it makes life more difficult for exporters, as the appreciation increases the price of British goods abroad.
At the same time, in the face of news that average pay settlements in the UK edged up in the first three months of this year, the Bank of England is further concerned that the current rate of inflation will encourage workers to press for higher wage settlements, which would create more inflation.
The much acclaimed new interactive learning package LiveEcon can help you undertand the economics behind these important policy events. For instance, Chapters 13 and 16 at intermediate level examine the workings of the foreign exchange market and the interaction between the labour market and the price level. Chapters 6 and 11 at principles and intermediate level, respectively, also illustrate how the interest rate is determined in the money market. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The much acclaimed new interactive learning package LiveEcon can help you undertand the economics behind these important policy events. For instance, Chapters 13 and 16 at intermediate level examine the workings of the foreign exchange market and the interaction between the labour market and the price level. Chapters 6 and 11 at principles and intermediate level, respectively, also illustrate how the interest rate is determined in the money market. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Thursday, March 29, 2007
Complacency puts jobs in car industry at risk, warn MPs
Britain's motor industry risks haemorrhaging jobs overseas unless the government and companies commit to improving skills and to research and development,a parliamentary inquiry warns today. The Commons trade and industry committee report recommends that government "review whether the UK is really still at the forefront of innovative design and technology in the automotive sector, or whether research facilities are being used for work to support technological developments elsewhere in the world". Global overcapacity in car manufacturing is pushing producers to shut plants or shift capacity to lower-cost centres in eastern Europe or Asia. The UK industry is seen as especially vulnerable because of its location and the fact that all its traditional brands are now foreign-owned.
Read the full story at: http://www.ft.com/cms/s/261552c4-dd93-11db-8d42-000b5df10621.html
Much debate has taken place in the UK in recent years regarding the so-called ‘skills gap’ of the country relative to its trading partners (e.g. Germany, France etc), namely the fact that British workers do not posses the set of necessary skills required to keep up with modern technological advances in industry, in particular, and the economy, in general. For this reason, economists have claimed that more emphasis should be given to the provision of vocational training by companies.
The much acclaimed new interactive learning package LiveEcon can help you undertand the economics behind these important policy events. For instance, Chapter 16 at intermediate level illustrates the effect of changes in H on the 'labour supply’ and ‘aggregate supply curves’ of the economy. In addition, Chapter 17 integrates H into the Solow growth model. Find out how to get LiveEcon at http://www.liveecon.com/. Dowload this blog as a Blogcast via the website.
Britain's motor industry risks haemorrhaging jobs overseas unless the government and companies commit to improving skills and to research and development,a parliamentary inquiry warns today. The Commons trade and industry committee report recommends that government "review whether the UK is really still at the forefront of innovative design and technology in the automotive sector, or whether research facilities are being used for work to support technological developments elsewhere in the world". Global overcapacity in car manufacturing is pushing producers to shut plants or shift capacity to lower-cost centres in eastern Europe or Asia. The UK industry is seen as especially vulnerable because of its location and the fact that all its traditional brands are now foreign-owned.
The report, sparked by MG Rover's collapse in 2005, was broadened to examine the competitiveness of the UK motor industry as a whole after France's Peugeot Citroën announced the closure of its Ryton plant near Coventry last year and General Motors' Vauxhall Motors said it would cut a shift at its Ellesmere Port factory.
It expresses concern over Peugeot's claims about UK labour costs and the "more predictable" wage disadvantage relative to eastern Europe. "We recommend that government study this potentially significant claim to see whether there is such an incentive to cut manufacturing jobs in the UK," the report says.
It expresses concern over Peugeot's claims about UK labour costs and the "more predictable" wage disadvantage relative to eastern Europe. "We recommend that government study this potentially significant claim to see whether there is such an incentive to cut manufacturing jobs in the UK," the report says.
Read the full story at: http://www.ft.com/cms/s/261552c4-dd93-11db-8d42-000b5df10621.html
The stock of human capital (H), the amount of knowledge and skills embodied in a country’s active population, is the most important determinant of the quality of the economy’s labour supply. An increase in H is expected to reduce production costs, other things equal, thus allowing firms to retain a competitive advantage in the face of the intense globalisation of economic activity. The stock of H is also considered by the so-called new endogenous growth theory to constitute one of the main determinants of sustained economic growth.
Much debate has taken place in the UK in recent years regarding the so-called ‘skills gap’ of the country relative to its trading partners (e.g. Germany, France etc), namely the fact that British workers do not posses the set of necessary skills required to keep up with modern technological advances in industry, in particular, and the economy, in general. For this reason, economists have claimed that more emphasis should be given to the provision of vocational training by companies.
The much acclaimed new interactive learning package LiveEcon can help you undertand the economics behind these important policy events. For instance, Chapter 16 at intermediate level illustrates the effect of changes in H on the 'labour supply’ and ‘aggregate supply curves’ of the economy. In addition, Chapter 17 integrates H into the Solow growth model. Find out how to get LiveEcon at http://www.liveecon.com/. Dowload this blog as a Blogcast via the website.
Thursday, March 22, 2007
U.S. Initial Jobless Claims Declined 4,000 Last Week
First-time claims for jobless benefits in the U.S. unexpectedly fell last week to the lowest in more than a month, signaling strength in the labor market. Initial jobless claims fell by 4,000 to 316,000 in the week ended March 17, the fewest since Feb. 3, the Labor Department said today in Washington. The total number of people collecting benefits dropped to the lowest in almost two months.
Federal Reserve policy makers yesterday kept the benchmark interest rate at 5.25 percent and repeated a forecast that the economy will probably expand ``at a moderate pace'' in coming months. ``There hasn't been much change in layoff conditions,'' said Michelle Girard, a senior economist at RBS Greenwich Capital in Greenwich, Connecticut. ``There is more than enough labor demand to keep the labor market tight.''
The unemployment rate fell to 4.5 percent last month, approaching the five-year low 4.4 percent reached in October.
Read the full story at: http://www.bloomberg.com/apps/news?pid=20601068&sid=aGB7_hZ8RK4c&refer=economy
Equilibrium in the labour market is determined by the interaction of the demand for labour by firms and the supply of labour by individuals. Robust economic growth is expected to contribute to a continuation in the pace of hiring by firms, thus affecting the labour demand curve of the economy. Note, however, that high levels of ``resource utilization,'' which are reflected by the low jobless rate, pose a risk that inflation pressures will develop in the future.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, Chapter 7 provides an introduction to the issues of employment and the implications for inflation. Chapter 16 also discusses the Phillips Curve in detail at an intermediate level. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
First-time claims for jobless benefits in the U.S. unexpectedly fell last week to the lowest in more than a month, signaling strength in the labor market. Initial jobless claims fell by 4,000 to 316,000 in the week ended March 17, the fewest since Feb. 3, the Labor Department said today in Washington. The total number of people collecting benefits dropped to the lowest in almost two months.
Federal Reserve policy makers yesterday kept the benchmark interest rate at 5.25 percent and repeated a forecast that the economy will probably expand ``at a moderate pace'' in coming months. ``There hasn't been much change in layoff conditions,'' said Michelle Girard, a senior economist at RBS Greenwich Capital in Greenwich, Connecticut. ``There is more than enough labor demand to keep the labor market tight.''
The unemployment rate fell to 4.5 percent last month, approaching the five-year low 4.4 percent reached in October.
Read the full story at: http://www.bloomberg.com/apps/news?pid=20601068&sid=aGB7_hZ8RK4c&refer=economy
Equilibrium in the labour market is determined by the interaction of the demand for labour by firms and the supply of labour by individuals. Robust economic growth is expected to contribute to a continuation in the pace of hiring by firms, thus affecting the labour demand curve of the economy. Note, however, that high levels of ``resource utilization,'' which are reflected by the low jobless rate, pose a risk that inflation pressures will develop in the future.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, Chapter 7 provides an introduction to the issues of employment and the implications for inflation. Chapter 16 also discusses the Phillips Curve in detail at an intermediate level. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Brown cuts basic tax rate by 2p
Chancellor Gordon Brown announced a cut in the basic income tax rate from April 2008 in a surprise move at the end of what is likely to be his last Budget. But his decision to scrap the lower 10p tax rate and raise National Insurance thresholds means few will be better off - and prompted claims of a "con trick".
Read the full story at: http://news.bbc.co.uk/1/hi/uk_politics/6472999.stm
A fall in the rate of income tax will increase disposable income, thus increasing consumption and hence GDP. It may also have important supply side effects in improving the incentives to work (rather than, for example, claim benefits), all other things equal. However, in this case, because other taxes have been raised and tax thresholds altered, for most people disposable income will overall be unchanged. Thus the effect will be relatively neutral. Many commentators see the fall in the headline rate of tax as a pre-emtive strike against the Conservatives, who have traditionally regarded low-tax as their territory, in the run-up to the next general election.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The effect of a change in income tax is detailed in chapters 4 and 9/10/14 (at principles and intermediate level, respectively). Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Chancellor Gordon Brown announced a cut in the basic income tax rate from April 2008 in a surprise move at the end of what is likely to be his last Budget. But his decision to scrap the lower 10p tax rate and raise National Insurance thresholds means few will be better off - and prompted claims of a "con trick".
Read the full story at: http://news.bbc.co.uk/1/hi/uk_politics/6472999.stm
A fall in the rate of income tax will increase disposable income, thus increasing consumption and hence GDP. It may also have important supply side effects in improving the incentives to work (rather than, for example, claim benefits), all other things equal. However, in this case, because other taxes have been raised and tax thresholds altered, for most people disposable income will overall be unchanged. Thus the effect will be relatively neutral. Many commentators see the fall in the headline rate of tax as a pre-emtive strike against the Conservatives, who have traditionally regarded low-tax as their territory, in the run-up to the next general election.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The effect of a change in income tax is detailed in chapters 4 and 9/10/14 (at principles and intermediate level, respectively). Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Tuesday, March 20, 2007
UK inflation rate rises to 2.8%
Inflation in the UK accelerated in February, raising the possibility of further interest rate rises.
On the Consumer Prices Index (CPI) measure, inflation in February was 2.8%, up from 2.7% the month before.
The figure - pushed up by increases in air passenger duty and thus air fares - remains well above the Bank of England's 2.0% target for the CPI. There was a bigger rise in the Retail Prices Index (RPI), which rose to 4.6% from January's figure of 4.2%.
"Today's figures are a timely reminder that the Bank of England's tightening work is probably not yet finished," said Rob Carnell, economist at ING.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6469747.stm
The increases in inflation has renewed speculation that the Bank of England may have to raise interest rates yet again, in order to curb consumer borrowing. The interesting issue this month is that recent tax hikes, such as the large increases in duties on air travel, which were required to help balance the government's budget, have themselves had negative consequences in increasing inflation - which in turn may trigger higher interest rates and higher wage claims.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, monetary policy is discussed in detail in chapters 5 and 11, and the operation of monetary policy is examined in chapters 6 (tutorial 3) and 11 (at principles and intermediate level, respectively). Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Inflation in the UK accelerated in February, raising the possibility of further interest rate rises.
On the Consumer Prices Index (CPI) measure, inflation in February was 2.8%, up from 2.7% the month before.
The figure - pushed up by increases in air passenger duty and thus air fares - remains well above the Bank of England's 2.0% target for the CPI. There was a bigger rise in the Retail Prices Index (RPI), which rose to 4.6% from January's figure of 4.2%.
"Today's figures are a timely reminder that the Bank of England's tightening work is probably not yet finished," said Rob Carnell, economist at ING.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6469747.stm
The increases in inflation has renewed speculation that the Bank of England may have to raise interest rates yet again, in order to curb consumer borrowing. The interesting issue this month is that recent tax hikes, such as the large increases in duties on air travel, which were required to help balance the government's budget, have themselves had negative consequences in increasing inflation - which in turn may trigger higher interest rates and higher wage claims.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, monetary policy is discussed in detail in chapters 5 and 11, and the operation of monetary policy is examined in chapters 6 (tutorial 3) and 11 (at principles and intermediate level, respectively). Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Thursday, March 15, 2007
Record US trade deficit in 2006
The US current account deficit jumped by 8.2% to a record $856.6bn (£444bn) in 2006, official figures show. The annual figure represented 6.5% of US gross domestic product in 2006, up from 6.4% in 2005. The deficit for 2006 meant the US was borrowing more than $2bn daily to finance its trade gap. The US has so far financed its expanding current account deficit through foreign demand for US Treasury securities, particularly from Japan and China.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6450565.stm
The current account is the broadest measure of trade, covering goods and investment flows between countries. A country that runs a current account deficit (i.e. it imports more from the rest of the world (RoW) compared to what it exports) finances this gap by running a capital account surplus. In other words, it borrows money from abroad by selling to foreign investors domestic financial assets (e.g. government bonds). Such capital flows eventually have implications for the determination of the value of the country’s exchange rate.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, Chapters 3 and 13 (at principles and intermediate level, respectively) describe the workings of the open economy, in general, and of the foreign exchange market in relation to the IS-LM-BP model, in particular. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The US current account deficit jumped by 8.2% to a record $856.6bn (£444bn) in 2006, official figures show. The annual figure represented 6.5% of US gross domestic product in 2006, up from 6.4% in 2005. The deficit for 2006 meant the US was borrowing more than $2bn daily to finance its trade gap. The US has so far financed its expanding current account deficit through foreign demand for US Treasury securities, particularly from Japan and China.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6450565.stm
The current account is the broadest measure of trade, covering goods and investment flows between countries. A country that runs a current account deficit (i.e. it imports more from the rest of the world (RoW) compared to what it exports) finances this gap by running a capital account surplus. In other words, it borrows money from abroad by selling to foreign investors domestic financial assets (e.g. government bonds). Such capital flows eventually have implications for the determination of the value of the country’s exchange rate.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, Chapters 3 and 13 (at principles and intermediate level, respectively) describe the workings of the open economy, in general, and of the foreign exchange market in relation to the IS-LM-BP model, in particular. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The UK economy will perform better than previously thought in 2007, the CBI has said, although it thinks interest rates will rise again soon.
The employers body is predicting growth of 2.9% in 2007, ahead of its previous 2.7% forecast. "The economy will enjoy better than expected growth this year as consumers continue to spend and businesses invest in their companies," said Ian McCafferty, the CBI's chief economic adviser.
The CBI expects the Bank of England to keep a "tight grip" on monetary policy despite an expected fall in inflation. It expects rates to rise soon to 5.5% and remain there throughout 2008.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6450787.stm
Strong consumer and business confidence appear to be underpinning very healthy growth projections in the UK. Consumption and investment are both key components of GDP, and hence growth in consumption and investment feed through into growth in GDP. Moreover, improvements in the investment rate push actual investment above break-even investment (the amount of investment needed to offset depreciation, for example), increasing the capital stock, and hence output in the long-run.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Chapter 8 also discusses the effect of investment on economic growth in the long run. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The employers body is predicting growth of 2.9% in 2007, ahead of its previous 2.7% forecast. "The economy will enjoy better than expected growth this year as consumers continue to spend and businesses invest in their companies," said Ian McCafferty, the CBI's chief economic adviser.
The CBI expects the Bank of England to keep a "tight grip" on monetary policy despite an expected fall in inflation. It expects rates to rise soon to 5.5% and remain there throughout 2008.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6450787.stm
Strong consumer and business confidence appear to be underpinning very healthy growth projections in the UK. Consumption and investment are both key components of GDP, and hence growth in consumption and investment feed through into growth in GDP. Moreover, improvements in the investment rate push actual investment above break-even investment (the amount of investment needed to offset depreciation, for example), increasing the capital stock, and hence output in the long-run.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Chapter 8 also discusses the effect of investment on economic growth in the long run. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Monday, March 12, 2007
Japan's growth rate picks up pace
Japan's economy, the world's second largest, has grown more quickly than many experts forecast, underlining its emergence from years of stagnation. The rate of growth was 1.3% in the three months from October to December, up from 1.2% in the previous quarter, Cabinet Office figures showed. On an annual basis growth was 5.5%, the quickest for three years. Japan's economy has turned around as consumers and companies have picked up spending and exports have increased.
But analysts said the latest growth figures were unlikely to prompt another rise in rates as concerns remained that that higher borrowing costs could stall the country's economic recovery. Politicians have asked the Bank of Japan (BOJ) not to rush to raise interest rates for fear that it would stop consumer and company spending in its tracks. Japan has only just increased its main borrowing cost from almost zero to 0.5%, the highest level in a decade.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6440761.stm
The growth of GDP in Japan has been fuelled by growth in two of the key components of GDP: consumption and exports. A rise in interest rates would depress both consumption and investment, and as these are both important components of GDP, would reduce growth of GDP. Since Japan's recovery is seen as being fragile, most commentators think that the BoJ will not raise interest rates and jeopardise the recovery.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Japan's economy, the world's second largest, has grown more quickly than many experts forecast, underlining its emergence from years of stagnation. The rate of growth was 1.3% in the three months from October to December, up from 1.2% in the previous quarter, Cabinet Office figures showed. On an annual basis growth was 5.5%, the quickest for three years. Japan's economy has turned around as consumers and companies have picked up spending and exports have increased.
But analysts said the latest growth figures were unlikely to prompt another rise in rates as concerns remained that that higher borrowing costs could stall the country's economic recovery. Politicians have asked the Bank of Japan (BOJ) not to rush to raise interest rates for fear that it would stop consumer and company spending in its tracks. Japan has only just increased its main borrowing cost from almost zero to 0.5%, the highest level in a decade.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6440761.stm
The growth of GDP in Japan has been fuelled by growth in two of the key components of GDP: consumption and exports. A rise in interest rates would depress both consumption and investment, and as these are both important components of GDP, would reduce growth of GDP. Since Japan's recovery is seen as being fragile, most commentators think that the BoJ will not raise interest rates and jeopardise the recovery.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Thursday, March 08, 2007
Most of US sees 'modest growth'
Some parts of the US reported slower economic growth in February, as firms battled the fallout of problems with the housing and auto industries. The contraction came as firms cut their inventories and consumers spent less. However, the Federal Reserve's Beige Book showed that most parts of the US experienced modest growth.
Most of the districts said that there was little change in prices, and that pay increases "generally remained moderate" despite the job market staying healthy in most parts of the country. Such observations indicate that inflation is not growing - good news for the Fed which is aiming to slow the economy enough to curb inflation but not enough to cripple economic growth.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6428707.stm
Falls in consumer borrowing and firm inventories, will depress GDP. Conversely, rises in consumer and investor confidence will tend to increase GDP. In some regions of the US, the latter is the case, and in other regions the former. Interest rate rises designed to cool growing areas may have adverse effects in areas not so well favoured. This points to an important policy dilemma in a monetary union.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular the link between wage and price inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Some parts of the US reported slower economic growth in February, as firms battled the fallout of problems with the housing and auto industries. The contraction came as firms cut their inventories and consumers spent less. However, the Federal Reserve's Beige Book showed that most parts of the US experienced modest growth.
Most of the districts said that there was little change in prices, and that pay increases "generally remained moderate" despite the job market staying healthy in most parts of the country. Such observations indicate that inflation is not growing - good news for the Fed which is aiming to slow the economy enough to curb inflation but not enough to cripple economic growth.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6428707.stm
Falls in consumer borrowing and firm inventories, will depress GDP. Conversely, rises in consumer and investor confidence will tend to increase GDP. In some regions of the US, the latter is the case, and in other regions the former. Interest rate rises designed to cool growing areas may have adverse effects in areas not so well favoured. This points to an important policy dilemma in a monetary union.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular the link between wage and price inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Wednesday, March 07, 2007
Minimum wage up to £5.52 an hour
The national minimum wage is to rise by 17p - about 3% - from £5.35 to £5.52 an hour from October 2007. The rate for workers aged 18-21 will rise by 15p to £4.60 an hour, while workers aged 16 and 17 will get a 10p rise to £3.40 an hour. The increases will affect 1.3 million workers and are in line with inflation. The Trade and Industry Secretary, Alistair Darling, rejected a recommendation that 21-year-olds should receive the full adult rate of £5.52 an hour, saying that such a move could damage their job prospects.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6425965.stm
The UK minimum wage was first introduced in 1999, amid concerns that such a move will jeopardise the employment prospects of the lower-paid segment of the workforce (e.g. young employees). This should occur because if the government arbitrarily imposes a national real wage that is higher than the one that equilibrates the labour market, then employers would find it costly to hire low-skilled labour.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular how the real wage (W/P) affects the supply and demand for labour. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The national minimum wage is to rise by 17p - about 3% - from £5.35 to £5.52 an hour from October 2007. The rate for workers aged 18-21 will rise by 15p to £4.60 an hour, while workers aged 16 and 17 will get a 10p rise to £3.40 an hour. The increases will affect 1.3 million workers and are in line with inflation. The Trade and Industry Secretary, Alistair Darling, rejected a recommendation that 21-year-olds should receive the full adult rate of £5.52 an hour, saying that such a move could damage their job prospects.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6425965.stm
The UK minimum wage was first introduced in 1999, amid concerns that such a move will jeopardise the employment prospects of the lower-paid segment of the workforce (e.g. young employees). This should occur because if the government arbitrarily imposes a national real wage that is higher than the one that equilibrates the labour market, then employers would find it costly to hire low-skilled labour.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular how the real wage (W/P) affects the supply and demand for labour. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Monday, March 05, 2007
IMF upbeat on UK economic growth
The UK economy will grow by 2.9% this year, the International Monetary Fund (IMF) has forecast.
Describing Britain's economic performance as "impressive", the IMF said it was revising up its 2007 growth projection for the UK from 2.75%.
However, the Washington DC-based institution warned that UK interest rates may have to rise further if wage settlements are not kept under control. Chancellor Gordon Brown, who is widely expected to take over from Prime Minister Tony Blair in the summer, last week imposed a tough pay settlement on public sector workers, with average pay increases rising by just 1.9%.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6421087.stm
The wage bill is part of any firm's costs. A rise in wages will, all other things being equal, push up a firms costs, and this will be passed on to consumers in the form of increased prices. Thus, there is a positive link between wage inflation and price inflation. A rise in inflation will trigger interest rate rises by the central bank, which will reduce economic growth. By imposing harsh wage discipline on the public sector, the Chancellor hopes to send a signal to the private sector to also show wage restraint.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular the link between wage and price inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The UK economy will grow by 2.9% this year, the International Monetary Fund (IMF) has forecast.
Describing Britain's economic performance as "impressive", the IMF said it was revising up its 2007 growth projection for the UK from 2.75%.
However, the Washington DC-based institution warned that UK interest rates may have to rise further if wage settlements are not kept under control. Chancellor Gordon Brown, who is widely expected to take over from Prime Minister Tony Blair in the summer, last week imposed a tough pay settlement on public sector workers, with average pay increases rising by just 1.9%.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6421087.stm
The wage bill is part of any firm's costs. A rise in wages will, all other things being equal, push up a firms costs, and this will be passed on to consumers in the form of increased prices. Thus, there is a positive link between wage inflation and price inflation. A rise in inflation will trigger interest rate rises by the central bank, which will reduce economic growth. By imposing harsh wage discipline on the public sector, the Chancellor hopes to send a signal to the private sector to also show wage restraint.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 7 and 16 at principles and intermediate level, respectively, describe the workings of the labour market, in particular the link between wage and price inflation. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Thursday, March 01, 2007
German jobless rate falls further
German unemployment continues to fall as improving economic prospects enable companies to hire more workers. Government figures showed the jobless rate falling to 10.1% in February, from 10.2% the month before. The upturn in the German economy in the past year, when growth levels hit a six-year high, resulted in a 826,000 fall in jobless numbers.
Strong domestic consumer demand has boosted companies' growth prospects. The improvement in German consumer spending, allied to a robust export market, has persuaded more firms to expand their workforces.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6404079.stm
Consumption is the largest component of aggregate expenditure. Rises in consumption, together with increasing exports, increase demand. The fall in unemployment is the supply side response to the increase in demand as firms take on new workers to meet that demand.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Chapter 7 and 15 (at principles and intermediate level, respectively) examine the supply side responses to demand shocks. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
German unemployment continues to fall as improving economic prospects enable companies to hire more workers. Government figures showed the jobless rate falling to 10.1% in February, from 10.2% the month before. The upturn in the German economy in the past year, when growth levels hit a six-year high, resulted in a 826,000 fall in jobless numbers.
Strong domestic consumer demand has boosted companies' growth prospects. The improvement in German consumer spending, allied to a robust export market, has persuaded more firms to expand their workforces.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6404079.stm
Consumption is the largest component of aggregate expenditure. Rises in consumption, together with increasing exports, increase demand. The fall in unemployment is the supply side response to the increase in demand as firms take on new workers to meet that demand.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Chapter 7 and 15 (at principles and intermediate level, respectively) examine the supply side responses to demand shocks. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Wednesday, February 28, 2007
US economic growth revised down
The US economy grew at a pace of 2.2% in the last three months of 2006, down from a previous estimate of 3.5% and below analysts' forecasts. The contraction came as firms cut their inventories and consumers spent less. Separate data showed new home sales fell nearly 17% in January from December, the biggest drop since 1994. Talking about the budget to Congress, Federal Reserve head Ben Bernanke reiterated recent comments that the US had to tackle its deficit urgently.
Read the full story at: http://news.bbc.co.uk/2/hi/business/6404561.stm
Consumption expenditure (C) and investment (I) constitute two of the main components of aggregate demand (AE) in the economy. A fall in these two elements will consequently lead to slower economic growth in the country's GDP. In addition, as the US administration is currently running relatively large budget and trade deficits (partly as the result of the Iraq war, but also due to escalating welfare and social security costs), these twin deficits are expected to lead to rapid growth in debt and interest payments in the future, which will be harmful for economic growth.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapters 4 and 9 (at principles and intermediate level, respectively) describe the various components of aggregate demand and illustrate the determination of national income. Chapter 8 also discusses the implications of fiscal policy for economic growth. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
Thursday, February 22, 2007
UK Budget Date Announced
This year's Budget is to be held on Wednesday, March 21st. It is expected that this will be Chancellor Gordon Brown's last Budget. Critics says he has been lucky that his growth forecasts have been so accurate. One of the key issues that is worrying voters at the moment is the matter of Inheritance Tax which kicks in at £265,000. That means most home owners - particularly in the South East - will have to pay 40% tax on the remainder of their assets when they die. Property prices have risen hugely since the Labour Government won the General Election in 1997.
Read the full story at: http://news.sky.com/skynews/article/0,,30400-1252771,00.html
Favourable economic growth in the UK has enabled Gordon Brown's growth projections to be realised. The higher income, and increased taxation, has boosted tax revenue as a whole, making the government deficit and government borrowing figures look less damaging than critics expected. However, concerns about government borrowing remain, and fears of further tax rises have not subsided. Moreover, concerns are mounting over increasing numbers of people on middle incomes being drawn above higher rate income tax and inheritance tax thresholds.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The processes at work behing economic growth are explored in Chapter 8 at principles level and Chapter 17 at intermediate level. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as aBlogcast via the website.
This year's Budget is to be held on Wednesday, March 21st. It is expected that this will be Chancellor Gordon Brown's last Budget. Critics says he has been lucky that his growth forecasts have been so accurate. One of the key issues that is worrying voters at the moment is the matter of Inheritance Tax which kicks in at £265,000. That means most home owners - particularly in the South East - will have to pay 40% tax on the remainder of their assets when they die. Property prices have risen hugely since the Labour Government won the General Election in 1997.
Read the full story at: http://news.sky.com/skynews/article/0,,30400-1252771,00.html
Favourable economic growth in the UK has enabled Gordon Brown's growth projections to be realised. The higher income, and increased taxation, has boosted tax revenue as a whole, making the government deficit and government borrowing figures look less damaging than critics expected. However, concerns about government borrowing remain, and fears of further tax rises have not subsided. Moreover, concerns are mounting over increasing numbers of people on middle incomes being drawn above higher rate income tax and inheritance tax thresholds.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The processes at work behing economic growth are explored in Chapter 8 at principles level and Chapter 17 at intermediate level. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as aBlogcast via the website.
Wednesday, February 21, 2007
January consumer prices up more than expected
U.S. consumer prices rose more than expected in January despite a dip in energy prices,
as medical costs jumped, according to a Labor Department report on Wednesday that
revived worries of inflation. Consumer prices rose 0.2 percent, while core prices,
which exclude food and energy costs, climbed 0.3 percent. The higher-than-expected
numbers raised concerns the Federal Reserve, which has said it is vigilant against any
rise in inflation, might need to eventually raise interest rates to tamp down price
pressures, rather than lower them, as markets had anticipated. The report led financial
markets to trim bets on interest-rate cuts. U.S. Treasury debt prices fell, U.S. stock
futures added to losses and the dollar rose. "This adds credibility to Fed Chairman Ben
Bernanke in his monetary report to Congress last week that inflation remains a
concern," said Richard DeKaser, chief economist for National City Corp. in Cleveland.
Read the full story at: http://www.reuters.com/article/ousiv/idUSN2019645120070221
Changes in energy and/or medical costs are supply shocks to the economy that eventually
feed into changes in the overall price level. The extent to which the impact of these
shocks is divided between changes in output or the price level depends on whether a
Keynesian fix-price or a classical flex-price world is assumed. The announcement of
higher consumer prices should make the Federal Reserve contemplate a rise in interest
rates, which would counter the inflationary pressure by raising borrowing costs for
firms. In turn, the expectation of higher US rates in the future results in foreign
exchange traders speculating by buying dollars, which increases the value of the dollar
in the present time. This illustrates the important role that expectations play in
determining the economy's magnitudes.
The much acclaimed new interactive learning package LiveEcon can help you understand
the economics behind these important policy events. The impact of supply-side shocks on
the price level of the economy is illustrated in Chapter 7 at principles level and
Chapter 16 at intermediate level. Monetary policy is discussed in detail in chapters 5
and 11 . Chapter 16 also demonstrates certain avenues via which expectations affect
prices. Find out how to get LiveEcon at www.liveecon.com. Download this blog as a
Blogcast via the website.
U.S. consumer prices rose more than expected in January despite a dip in energy prices,
as medical costs jumped, according to a Labor Department report on Wednesday that
revived worries of inflation. Consumer prices rose 0.2 percent, while core prices,
which exclude food and energy costs, climbed 0.3 percent. The higher-than-expected
numbers raised concerns the Federal Reserve, which has said it is vigilant against any
rise in inflation, might need to eventually raise interest rates to tamp down price
pressures, rather than lower them, as markets had anticipated. The report led financial
markets to trim bets on interest-rate cuts. U.S. Treasury debt prices fell, U.S. stock
futures added to losses and the dollar rose. "This adds credibility to Fed Chairman Ben
Bernanke in his monetary report to Congress last week that inflation remains a
concern," said Richard DeKaser, chief economist for National City Corp. in Cleveland.
Read the full story at: http://www.reuters.com/article/ousiv/idUSN2019645120070221
Changes in energy and/or medical costs are supply shocks to the economy that eventually
feed into changes in the overall price level. The extent to which the impact of these
shocks is divided between changes in output or the price level depends on whether a
Keynesian fix-price or a classical flex-price world is assumed. The announcement of
higher consumer prices should make the Federal Reserve contemplate a rise in interest
rates, which would counter the inflationary pressure by raising borrowing costs for
firms. In turn, the expectation of higher US rates in the future results in foreign
exchange traders speculating by buying dollars, which increases the value of the dollar
in the present time. This illustrates the important role that expectations play in
determining the economy's magnitudes.
The much acclaimed new interactive learning package LiveEcon can help you understand
the economics behind these important policy events. The impact of supply-side shocks on
the price level of the economy is illustrated in Chapter 7 at principles level and
Chapter 16 at intermediate level. Monetary policy is discussed in detail in chapters 5
and 11 . Chapter 16 also demonstrates certain avenues via which expectations affect
prices. Find out how to get LiveEcon at www.liveecon.com. Download this blog as a
Blogcast via the website.
Europe Posts 2006 Trade Deficit, First in Six Years (Wed14 Feb)
Europe recorded its first trade deficit for a full year since 2000, led by soaring energy costs and worsening trade positions with China, Russia and Japan. The euro-area trade deficit of 8.2 billion euros ($10.8 billion) for 2006 followed a 16.2 billion-euro surplus for the prior year, the European Union's statistics office in Luxembourg said today, and is only the second full-year shortfall since the office began compiling the data in 1995. The trade gap in 2000 was 21.2 billion euros. The widening deficits with Asian nations may fan concern among European governments that the Chinese yuan and Japanese yen need to strengthen.
Read the full story at: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ahXSwyIY_3Ko
Many countries in Europe are major importers of oil, thus making their current accounts (defined as the difference between exports and imports), and, hence, their balance of payments, susceptible to altering energy costs. In addition, developments in global exchange rates determine the competitiveness of euro-area exports, thus also contributing to the overall value of the balance of payments accounts. For example, there is much concern that the value of the Chinese yuan has fallen versus the euro, which renders Chinese exports more attractive to the consumers of Euro-land, and European exports more expensive to Chinese buyers.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapter 3 at principles levels describes the composition of national income in an open economy, while Chapters 13 and 14 integrate the open economy parameters and introduce the foreign exchange market into the IS-LM paradigm. Find out how to get LiveEcon at www.liveecon.com. Download this blog as a Blogcast via the website.
Europe recorded its first trade deficit for a full year since 2000, led by soaring energy costs and worsening trade positions with China, Russia and Japan. The euro-area trade deficit of 8.2 billion euros ($10.8 billion) for 2006 followed a 16.2 billion-euro surplus for the prior year, the European Union's statistics office in Luxembourg said today, and is only the second full-year shortfall since the office began compiling the data in 1995. The trade gap in 2000 was 21.2 billion euros. The widening deficits with Asian nations may fan concern among European governments that the Chinese yuan and Japanese yen need to strengthen.
Read the full story at: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ahXSwyIY_3Ko
Many countries in Europe are major importers of oil, thus making their current accounts (defined as the difference between exports and imports), and, hence, their balance of payments, susceptible to altering energy costs. In addition, developments in global exchange rates determine the competitiveness of euro-area exports, thus also contributing to the overall value of the balance of payments accounts. For example, there is much concern that the value of the Chinese yuan has fallen versus the euro, which renders Chinese exports more attractive to the consumers of Euro-land, and European exports more expensive to Chinese buyers.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Chapter 3 at principles levels describes the composition of national income in an open economy, while Chapters 13 and 14 integrate the open economy parameters and introduce the foreign exchange market into the IS-LM paradigm. Find out how to get LiveEcon at www.liveecon.com. Download this blog as a Blogcast via the website.
Tuesday, February 20, 2007
Bernanke: US Economy healthy, but ...
Growth is solid, but inflation remains a risk; Fed ready to take action if needed, chairman says. Federal Reserve Chairman Ben Bernanke on Wednesday said the U.S. economy appeared sound with inflation easing, as he expressed confidence the current level of interest rates would cut further into price pressures. "Overall, the U.S. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes," Bernanke told the Senate Banking Committee.
While Bernanke said the Fed's current policy stance, with overnight interest rates at 5.25 percent, was likely gradually to bring nonfood, nonenergy inflation down further, he said the central bank was prepared to act to beat back inflation if necessary.The U.S. central bank has held benchmark borrowing costs steady since pushing them up to their current level last June.
Read the full story at: http://money.cnn.com/2007/02/14/news/economy/bernanke.reut/index.htm?postversion=2007021415
Like the Bank of England and the European Central Bank, the Federal Reserve has as its main target the control of inflation, and uses interest rate setting as its monetary policy instrument. Unlike the Bank of England, however, the Fed does not have an explicit inflation band which is deemed as acceptable. The Fed is therefore holding steady with the current interest rate, expecting this level to keep a lid on inflationary pressure, but keeping a close watch on inflation as economic growth increases, ready to increase interest rates should inflation start to increase.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Monetary policy is discussed in detail in chapters 5 and 11 (at principles and intermediate level, respectively). Find out how to get LiveEcon at www.liveecon.com Download this blog as a Blogcast via the website.
Growth is solid, but inflation remains a risk; Fed ready to take action if needed, chairman says. Federal Reserve Chairman Ben Bernanke on Wednesday said the U.S. economy appeared sound with inflation easing, as he expressed confidence the current level of interest rates would cut further into price pressures. "Overall, the U.S. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes," Bernanke told the Senate Banking Committee.
While Bernanke said the Fed's current policy stance, with overnight interest rates at 5.25 percent, was likely gradually to bring nonfood, nonenergy inflation down further, he said the central bank was prepared to act to beat back inflation if necessary.The U.S. central bank has held benchmark borrowing costs steady since pushing them up to their current level last June.
Read the full story at: http://money.cnn.com/2007/02/14/news/economy/bernanke.reut/index.htm?postversion=2007021415
Like the Bank of England and the European Central Bank, the Federal Reserve has as its main target the control of inflation, and uses interest rate setting as its monetary policy instrument. Unlike the Bank of England, however, the Fed does not have an explicit inflation band which is deemed as acceptable. The Fed is therefore holding steady with the current interest rate, expecting this level to keep a lid on inflationary pressure, but keeping a close watch on inflation as economic growth increases, ready to increase interest rates should inflation start to increase.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. Monetary policy is discussed in detail in chapters 5 and 11 (at principles and intermediate level, respectively). Find out how to get LiveEcon at www.liveecon.com Download this blog as a Blogcast via the website.
Thursday, February 15, 2007
Consumers boost Japan's economy
Resurgent consumer spending helped Japan's economy to grow faster than expected in the last three months of 2006, government figures have shown. Japan's gross domestic product (GDP) grew by 1.2% in the October to December period from the previous quarter. Consumption, which makes up half of Japan's gross domestic product, was up 1.1% on the same period a year ago.
Policymakers raised the level of borrowing by a quarter point to 0.25% last July, ending Japan's long period of zero rates. All economic data is being scrutinised for clues as to whether the Bank of Japan will raise interest rates at its meeting next week. While Japan's government prefers low rates to keep the economic recovery on track, other countries are demanding a rise to counter weakness in the yen.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6363791.stm
The Japanese economy has been for some time the victim of the "liquidity trap" and effectively zero interest rates - and the consequent ineffectiveness of monetary policy instruments in lifting the economy out of recession. Strong consumer spending is now beginning to lift GDP, hence the note of caution as to the effects that an interest rate rise would have at this stage of the recovery.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The composition of gross domestic product is examined in chapters 2 and 3 and the liquidity trap in chapter 11 at intermediate level. Find out how to get LiveEcon at www.liveecon.com Download this blog as a Blogcast via the website.
Resurgent consumer spending helped Japan's economy to grow faster than expected in the last three months of 2006, government figures have shown. Japan's gross domestic product (GDP) grew by 1.2% in the October to December period from the previous quarter. Consumption, which makes up half of Japan's gross domestic product, was up 1.1% on the same period a year ago.
Policymakers raised the level of borrowing by a quarter point to 0.25% last July, ending Japan's long period of zero rates. All economic data is being scrutinised for clues as to whether the Bank of Japan will raise interest rates at its meeting next week. While Japan's government prefers low rates to keep the economic recovery on track, other countries are demanding a rise to counter weakness in the yen.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6363791.stm
The Japanese economy has been for some time the victim of the "liquidity trap" and effectively zero interest rates - and the consequent ineffectiveness of monetary policy instruments in lifting the economy out of recession. Strong consumer spending is now beginning to lift GDP, hence the note of caution as to the effects that an interest rate rise would have at this stage of the recovery.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. The composition of gross domestic product is examined in chapters 2 and 3 and the liquidity trap in chapter 11 at intermediate level. Find out how to get LiveEcon at www.liveecon.com Download this blog as a Blogcast via the website.
