Article;
http://krugman.blogs.nytimes.com/2011/05/27/inflation-notes/
Comment;
The UK has been the home of English Classical economists and Keynesians who pioneered in understanding the growth and distribution on income. Before coming to the main point it is important to understand the natural forces that determine the rate of growth of an economy like rate of population growth that constrains the growth in the short run. By the way it is 0.7 %. Keynes himself admitted that capital is not as scarce as labor, therefore, an economy’s growth rate is largely decided by the rate of growth of population and workforce, which is exogenously determined. The rate of growth of population is also below the rate of frictional unemployment at 5%. The rate of population is even below the frictional employment rate. The economy has crossed its limit of economic expansion. As the discussion in the blog suggests there is no dearth of credit and liquidity; therefore we can conclude that the economy is not generating enough products and income, too. We can say that the economy is experiencing the classical stationary state and lack of innovation. Since the economy has not embraced euro and its exchange is market determined the economy has an advantage over the other European countries in managing its growth with the help of international trade. International trade is the sector from where the demand and income is likely to come from. As far as revenue and fiscal deficit are concerned they will not improve unless additional demand and income is created.
http://krugman.blogs.nytimes.com/2011/05/27/inflation-notes/
Comment;
The UK has been the home of English Classical economists and Keynesians who pioneered in understanding the growth and distribution on income. Before coming to the main point it is important to understand the natural forces that determine the rate of growth of an economy like rate of population growth that constrains the growth in the short run. By the way it is 0.7 %. Keynes himself admitted that capital is not as scarce as labor, therefore, an economy’s growth rate is largely decided by the rate of growth of population and workforce, which is exogenously determined. The rate of growth of population is also below the rate of frictional unemployment at 5%. The rate of population is even below the frictional employment rate. The economy has crossed its limit of economic expansion. As the discussion in the blog suggests there is no dearth of credit and liquidity; therefore we can conclude that the economy is not generating enough products and income, too. We can say that the economy is experiencing the classical stationary state and lack of innovation. Since the economy has not embraced euro and its exchange is market determined the economy has an advantage over the other European countries in managing its growth with the help of international trade. International trade is the sector from where the demand and income is likely to come from. As far as revenue and fiscal deficit are concerned they will not improve unless additional demand and income is created.
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