EconomicsNotes

  National debt refers to all the debt owed by government bodies of any sort within a country. It is owed to the holders of Treasury bonds. These bonds are issued with a return which represents the rate of interest on the bond, and if they are in demand, the interest rate falls; if they are not wanted, because of inflation, a threat of non-payment or from exogenous forces, an existing high level of debt, or a distrust of the government which issues them, the interest rate can be expected to rise. Most government bonds in developed countries have been a safe investment for financial institutions in the twenty-first century. For some economists, this means that high levels of borrowing by governments could divert funds that could otherwise have gone to investment or lending in the private sector, raising costs and interest for business and placing pressure on productivity. This process was called ‘crowding out’ in the past, though the term has fallen away a little. Borrowing is n...

  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...