Saturday, September 6, 2014

A great site by Bloomberg for IB Economics students

I recently found Bloomberg's 'Quick Take' section which has very many entries that could prove helpful to IB Economics students.

I will introduce this section with a Quick Take on Deflation.  Deflation is under section 2.3 of the IB economics syllabus ('Low and Stable Rate of Inflation') where candidates are asked not only to distinguish between inflation, disinflation and deflation but also to discuss the possible consequences of deflation.

Quoting from the site:
The ogre stalking Europe’s weak economy isn’t the one people have learned to fear. The monster isn’t inflation but its opposite: falling prices. Its name is deflation and it appears friendly. Why be afraid when the cash in people’s wallets buys more fuel and televisions, not less? Because when deflation grabs hold, companies and consumers stop spending. It strangles borrowers because their debts get harder to repay — a menace for countries struggling to exit the worst recession in a generation
Having prices go up more slowly helps consumers and can boost purchasing power. But when they actually drop, economic activity screeches to a halt. Households hold off making purchases as they anticipate further price declines; companies postpone investment and hiring as they are forced to cut prices. Sliding prices eat into sales and tax receipts, limiting pay raises and profit margins. They add to the debt burdens of companies and governments that would otherwise be eroded by inflation.
Students will also find excellent examples and reference material.


In this New York Times article the latest policy initiative by the European Central Bank is presented: Europe's Bank Takes Aggressive Steps.

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