Economic growth and the economic cycle

Short-run growth means the economy produces more output by using spare capacity it already has. Long-run growth means th

Economic performance

Economic growth and the economic cycle

Several factors drive how fast an economy grows. Demand-side factors affect spending in the short run. Supply-side facto

Economic performance

Economic growth and the economic cycle

Economic growth raises living standards and creates jobs, but it can also cause inflation, inequality, and environmental

Economic performance

Economic growth and the economic cycle

Economic growth raises living standards and tax revenues, but it also creates costs. Faster growth can damage the enviro

Economic performance

Economic growth and the economic cycle

Economies move through a repeating pattern of fast growth, slowdown, and recovery called the economic cycle. Economists

Economic performance

Economic growth and the economic cycle

An output gap measures how far actual output is from the economy's full-capacity level. A positive gap means the economy

Economic performance

Economic growth and the economic cycle

Sudden events called shocks push economies into different phases of the economic cycle. These shocks can come from insid

Economic performance

Economic growth and the economic cycle

Economies do not grow at a steady pace — output (the total value of goods and services produced) rises and falls in a re

Economic performance

Employment and unemployment

The UK measures unemployment in two main ways. The Claimant Count records people claiming unemployment-related benefits,

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Employment and unemployment

Voluntary unemployment describes workers who choose not to accept available jobs. Involuntary unemployment describes wor

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Employment and unemployment

Economists split unemployment into four types based on its cause. Each type — seasonal, frictional, structural, and cycl

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Employment and unemployment

Both the overall level of spending in the economy and the behaviour of workers and firms can cause unemployment to rise

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Employment and unemployment

Real wage unemployment happens when wages are stuck above the level that clears the labour market. More workers want job

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Employment and unemployment

The natural rate of unemployment (NRU) is the level of unemployment that exists even when the economy runs normally. It

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Employment and unemployment

Unemployment harms individuals by cutting their income and damaging their skills. It also weakens the whole economy by r

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Employment and unemployment

Unemployment — when people who are able and willing to work cannot find a job — is one of the key indicators used to jud

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Inflation and deflation

Inflation means prices across the economy are rising over time. Deflation means they are falling. Disinflation means pri

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Inflation and deflation

Prices across the economy can rise for two broad reasons. Either buyers are spending so much that firms push prices up,

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Inflation and deflation

Fisher's equation shows that the total money spent in an economy equals the total value of goods sold. Monetarists use t

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Inflation and deflation

When people expect prices to rise, they act in ways that actually cause prices to rise. Inflation expectations can becom

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Inflation and deflation

Inflation erodes what money can buy, hurting people on fixed incomes and savers. High or unpredictable inflation also da

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Inflation and deflation

Deflation means prices across the economy are falling over time. This sounds helpful, but it can trap the economy in a d

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Inflation and deflation

When the global price of raw materials like oil or wheat rises, UK firms face higher production costs. Those firms pass

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Inflation and deflation

Economic conditions abroad can push UK prices up or down. A boom overseas raises demand for UK exports and can increase

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Inflation and deflation

Sustained rises in the general price level — inflation — and sustained falls — deflation — are among the most closely wa

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Possible conflicts between macroeconomic policy objectives

An output gap measures how far an economy's actual output sits above or below its full potential. A negative gap signals

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Possible conflicts between macroeconomic policy objectives

The Phillips curve shows the relationship between unemployment and inflation. In the short run, lower unemployment tends

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Possible conflicts between macroeconomic policy objectives

The short-run Phillips curve tells policymakers they can trade lower unemployment for higher inflation. The long-run cur

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Possible conflicts between macroeconomic policy objectives

Governments use different economic policies to reduce the tension between conflicting goals. Some policies work quickly

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Possible conflicts between macroeconomic policy objectives

Governments aim to achieve low inflation, low unemployment, steady growth, and a stable balance of payments simultaneous

Economic performance