Economics 101 (#28) Fiscal Policy

February 6, 2012

In these days of austerity and governments scrimping and saving, the most important policy activity of government is fiscal policy. ‘Fiscal’ policy is any action by the government which affects the size or make up of government (exchequer) revenue/income or expenditure/spending. This section will deal with the all important issue of the national debt and how its size and growth affects the overall economy.

Heres the PDF PIIGSty Econ 101 #28 Fiscal Policy

How does a government tackle the national debt?  Like your average consumer with your typical debt, you have to tackle spending in the first place (and so control your overall debt levels) and pay down your debts by spending more money on them. A government does this by slashing public spending (education, transport, health etc) and increasing taxation. But what makes for a good tax system and what tax options does a government have?

Economics 101 (#27) Economic Objectives of the Government

February 5, 2012

In #26, we saw that government can (and does) take action to tackle inflation. But this is not all government can do. Backed by massive tax revenues and so substantial resources (huge money reserves and the power associated with that), governments have significant policy controls at their disposal which they manipulate as they see fit. Of course, juggling these is a very fine balancing act as they each objective can conflict with each other.

Heres the PDF PIIGSty Econ 101 #27 Economic Objectives of the Government


Economics 101 (#26) The Price Level (and Inflation)

February 5, 2012

Prices rarely stay the same for long. Over time, prices can rise or fall on most goods but usually, its one way traffic. Like a balloon, the rising of prices is called ‘Inflation.’ Remember that the price of any good is determined by the quality demanded and quantity supplied of that good (or, to use one word, scarcity). If a good is scarce, theres not much of it around but people still demand it so those who produce that good can charge more and increase their profits (think of oil).

If the cost/price of what you buy is rising at a faster rate than your income is growing – your real income (purchasing power) is falling (because you now can buy less per €). In a general sense, the government can control prices and incomes through taxation and other methods. But to do this, we need to measure prices.This isn’t always straightforward.

Heres the PDF PIIGSty Econ 101 #26 The Price Level

A big question then is whether inflation is a good thing or a bad thing? First of all, there are many different types of inflation and each has its own causes. Second, you’d think that the higher inflation runs, the less likely it is that our incomes are rising at the same rate – so high inflation is a bad thing?  The real answer is: It depends on who you are and what you do in the economy itself.

Economics 101 (#25) Factors Affecting National Income

February 5, 2012

Carrying on from #24, PIIGSty presents an additional (but equally important!) insight into this ever important issue. Now we turn and look at what factors affect the level of national income.

Heres the PDF PIIGSty Econ 101 #25 Factors Affecting NI

One of the most important concepts in economics is detailed in the following diagram on the circular flow of income. This explains how different sectors of the macroeconomy are linked and interact with each other from your average household to the workplace. How does money flow IN and what makes money flow OUT?

Economics 101 (#24) National Income

December 1, 2011

A term that has entered back into every day eco-speak is ‘national income‘ which quantifies the size of an economy. Its defined as the total income earned by permanent residents of a country in a year OR the total value of economic output produced over a year OR the total spend on output…

Pretty flexible definition then! Each has its pros and cons but ALL are important to know.

Heres the PDF PIIGSTY Econ 101 #24 National Income

These figures can all be very useful but there are also limitations to measuring an economy…


Economics 101 (#23) Money and Banking

December 1, 2011

Money makes the world go ’round. But..what exactly is money? Is it just those banknotes and coin we carry around…? How is money created and what can banks do to create it..all these questions are answered in this Econ 101!

Heres the PDF PIIGSTY Econ 101 #23 Money and Banking

Let us look at the commercial banks more closely…

Economics 101 (#22) Enterprise and Profit

December 1, 2011

The 4th Factor of Production (FOP) is Enterprise (and the reward for providing it, profit). Enterprise  is defined as the intitiatve involved in organising land, labour and capital and which bores the risks involved in production.

Heres the PDF PIIGSTY Econ 101 #22 Enterprise and Profit