EconomicsNotes

    Domestic Demand refers to the accumulated (that is, aggregate) demand within all the markets of an economy. As such, it can be handily summed up in a formula, C+I+G+X-M, where C is consumption, I is investment, G is net government spending, and X-M is net exports. This is usually referred to as ‘AD.’ Consumption is the largest part of AD. All the consumption decisions within the economy, including all non-investment purchases by households, individuals, and firms, add up to around two thirds of AD. In addition, the Keynesian economic theory asserts that there is a link between consumption and investment, which can drive AD upwards, as firms invest more when they see that consumers are purchasing more goods and services. Investment is a sustained addition to long-run aggregate supply, or capital for short. AD can be plotted against LRAS on a two-dimensional graph. If AD and LRAS meet at the point where there is maximum real GDP/GNI with no tendency for the price level t...

    The United Kingdom in 2022 is facing an historic energy problem.   An island sitting on top of vast reserves of coal, surrounded by gas and oil in its waters, and with great hydroelectric potential, has seen vast increases in energy pricing and has become dependent on foreign gas, without having significant storage capacity. In addition, a ‘green’ environmental agenda, recently compounded by ‘net zero’ policies with regard to carbon, has generated massive subsidies to underperforming renewable resources, and a confused and restrictive policy with regard to nuclear power. As world gas prices rise because of competition from East Asia and declines in supply, a price cap and marketisation policy in gas markets has caused the collapse of a large number of domestic gas suppliers and a forced increase in the cap which caused many bills to rise by over 50%. There is every indication that these bills will rise further. The microeconomic effects of this rise are simple to ...

  Departure from the European Union obviously carries with it micro- and macro-economic effects. Only one country has so far left the union (the UK) but others may choose to do so in the future. As a general rule, prediction is not predictive; circumstances and contexts apply. The terms on which a state might leave matter. Nevertheless, there are things which all governments and voters contemplating such a move might bear in mind. The EU is a customs union and contains a single market. A customs union, by definition, creates one tariff on imports around the zone, and a single market ensures smooth trade, a common baseline of standards and regulations, and the free movement of capital, products, goods and services, people, and investment. Any state which left such an arrangement would, even with a comprehensive trade deal, become a third party. It could no longer influence the tariff decisions of the bloc after a transition period, and would without a deal have to pay the import...

The balance of payments is the measure of all economic transactions between an economy and the rest of the world. As such, it covers the whole economy and should not be confused with the Government Budget. The balance of payments must always balance and if there is a deficit or surplus in goods, services, or some other component of the balance, it will be met with an equal change in the value of money or other asset. In a free exchange market, for instance, the currency of the country will adjust to alter living standards and the source of any surplus or deficit. The balance of payments consists of a current account, known as the balance of trade , a financial account , and a capital account. The current account is a record of net exports, plus income from abroad and direct transfers into a country. Many countries, particularly in the English-speaking world, run a deficit on this current account, because consumers and businesses purchase more imports than exports. This may well...

  The world since 1987 has become remarkably less unequal than it was. This is because of sustained growth in areas which had traditionally been rich in human history but which two hundred years of Imperial inequality had destabilised, such as South America, the Middle East, India, and East Asia. In those countries and areas, incomes have generally risen along with GDP/GNI, wages have increased, land value increases have provided one-off but huge benefits to many who were formerly peasants, and living standards have increased (at the temporary expense of the environment.) By contrast, Western countries have seen the opposite since 1973; their real wages and purchasing power have declined, their domination of world markets in a growing number of sectors and services has come under challenge, their national debts (since 2000) have generally grown, and their economies and supply chains have become globalised and financialised. This has not resulted in more unemployment, but has fo...

  GDP National Income is a metric of the flow of money in an economy represented by its goods, services, and wealth in a given period of time. It is essentially the same as National Output and National Expenditure, and is sometimes used as equivalent to Gross National Product (GNP.) In most economic discussions, GNP is adjusted twice. Firstly, economists tend to strip out net income earned abroad from GNP. This gives a figure for Gross Domestic Product. This is useful for economic studies because it focuses the analyst on what is going on within the economy. Secondly, economists usually adjust the nominal, ‘raw’ GDP figure for price changes, which leaves ‘real GDP’ as the key figure. [1] Change in Real GDP is therefore the most used and important indicator economists use. It tells the examiner about growth and allows for assumptions about the economic cycle . Real GDP tells economists about the accumulated flow of money around an economy but it does not really give an in...