You are welcome to ask questions on Economics. Though you might also like to try google custom search (top right) to see if the topic has been covered before.
I am looking to explain economic principles / ideas/ recent developments in economics. I can’t promise to answer, but will try if it meets the criteria below.
- Please don’t ask me to do your coursework / assignment e.t.c.
- Please don’t ask any maths calculations.
- The question and answer will be published here where everyone can see it (including your teacher).
- I aim to try and simplify economics; as a rough guide I would aim at an understanding similar to a good British A Level student.
- I am looking to explain economic principles / ideas/ recent developments in economics.
- I will answer as a new post, if you leave email address, I’ll usually send quick email. Check home page of blog for new post. With question and answers
I studied PPE at Lady Margaret Hall college, Oxford University, and currently work as an Economics A Level teacher. I have also examined several different economic units for Edexcel AS and A2.
Related
I have reviewed the pros and cons of globalization and there are positives and negatives, however, I’m still struggling to decide whether or not over its good overall. And these similar questions keep coming up.
Through the interdependency of almost all states, could that weaken state power?
Could globalization be the end of the age of states?
1. Why does a price increase of a substitute decreases the current supply? Why don’t the producers abuse that and just charge a higher price for their product instead of changing to the other product?
2. Having in mind that the demand curve express the highest price that the consumers are willing to pay for the last good available for a given quantity, and the supply curve express the lowest amount of money that producers are willing to accept for the last peace available at a given quantity then:
-why don’t neither consumers nor producers abuse that by:
a) consumers buying exactly at the supply curve (until equilibrium)?
b) producers sell exactly at the demand curve (until equilibrium)?
Having in mind that the both parties are driven by their self-interest, in the both cases described above they can realize either an enormous profit or to save a lot of money.
Hi,
I’m trying to find some information in the internet, about if the UK is experiencing a demand-pull or cost-push inflation at the moment and why ?
Comparison between the UK and the USA the basic regulations and tools used by the institutions that play the role of Central Bank
can any one tell me that How ”Tax is a budgetary tool for economic growth” ?
If occupational immobility decreases, this would mean that structural unemployment decreases. So basically if structural unemployment decreases does that mean that the productive potential of the economy increases? My theory was that there would be more people joining the labour force because they are no longer occupationally immobile
yes. lower occupational immobility would help reduce structural unemployment.
what if the government prints more money, but doesn’t allow prices to go higher?
even if a company runs out of supply, it doesn’t matter it will still be able to support the the company, and the consumers that want more will be force to try other brands as they are available. i hink this will create a balance in the economy. it also will motivate others to create new business.
Hi
I hope you are doing well.
Could you please answer this question, i tried to understand it but i could’t
so i hope you can answer it for me in deep details, please.
You have been hired to replace the manager of a firm that used only two inputs, capital and labor, to produce output. The firm can hire as much labor as it wants at a wage of $5 per hour and can rent as much capital as it wants at a price of $50 per hour. After you look at the company books, you learn that the company has been using capital and labor in amounts that imply a marginal product of labor of 50 and a marginal product of capital of 100. Do you know why the firm hired you? Explain.
How does a current account surplus change demand in an economy?
Hi,
Is accommodative monetary policy the same as expansionary monetary policy?
YEs
What segment of government is responsible for raising and reducing taxes?
In finance and economics, there are such things as “bubbles” in the economy. And when bubbles start forming, it normally isn’t a good thing. My question is, how many different kinds of “bubbles” are there? Such as the property bubble or stock market bubble. And how do they form and what are their economic impacts?
what is agricultural productivity
what is the difference between a partnership and a company?
Why do countries that experience a boom risk loosing international competitiveness?
Is lobbying a legislative body to invest in a company’s or an industry’s R&D considered rent-seeking? Under what circumstances is it so (or not-so)? What if the industry is heavily consolidated in the affected legislative region (e.g. municipality, state, country)?
I am not an Economist, but I am thinking about the motivations of politicians to encourage value-adding rather than rent-seeking. It seems (from my ignorant POV) that there’s much more (and many more) incentive for politicians to reward rent-seeking than creation of new wealth.
Hi
What country’s moved from being market to command economy or move from being command to market economy?
Please send me an answer also to my email thank you!
What supply side measures has the UK government taken to stimulate growth in the economy in 2013?
What were the causes of Greece’s and Cyprus’s current financial crises?
Greece decided to turn money burning into an Olympic Sport and so they ran out of money. Cyprus is just a rubbish country.
Hi,
Why does a build up of foreign exchange reserves lead to inflation as outlined in the paper?
Thank you
you explain the meaning of the term monetising debt?
does the demand for money increases when there is an increase in interest rates? If so, why?
My previous question arose because I was a bit confused with why qe aims to explicitly lower long term interest rates and not just interest rates in general.
What are long term interest rates and how do they differ from short term interest rates?
Hi,
I just wanted to ask with the UK’s QE programme, does it have much effect on the value of the Sterling? I understand that increasing the supply of the currency i.e. printing money, will lead to a fall in the value of the pound, but my problem is that since commercial banks in the UK are sitting on their cash reserves and are fearful of lending their money, how does the newly printed money leak onto the foreign exchange and effect it?
Hi,
I am Student, i have two Questions to which i am curious to know the answers :-
Q1) how maximisation of social welfare is possible in case of imperfect competition?
Q2) Why Should the managers make the market work in favour of business and not the other way?
Hi,
In response to the post on ‘printing money, imports and inflation’, why can’t the British government just print lots of money and import goods from abroad to relieve the pressure on its budget? The problem of inflation will be eliminated and yet our increasing demand for public sector goods can be met. Understandably, the majority of public spending are on services and things that we cannot import like healthcare service and social welfare payments, but it would at least be able to pay for tangible goods like healthcare equipment and military equipment which would ease the pressure a little bit on the budget, would it not?
This to me seems a little nieve on your behalf do you not understand why quantative easing is in place,basicaly it is my understanding that to kick start an economy the Bank of England issues funds in the form of monies at low if not zero interest rates.This money though is repayable and the emphasis of the current goverment is not to take on any increased borrowing hence this money released is for the wider purchasing public.
Either in the form of affordable mortgages which are guarranteed payment plans that intern are vetted by the Banking sytem on their appropriation,here a question arises whether the encouragement of longer periods of fixed repayments should be offered to a wider section of the population hence allowing new home owners to have long term fixed financial plans in place.
The other area encouraged is a little riskier as it envolves the private sector of bussiness which is struggling to maitain realistic new ideas that are affordable and more importantly profitable in a downturn period in world economics,though you have got to remember the small trader is already trying to trade when the Public sector is under financial restraints therefore micro ecomomics in most communities are slow due to the uncertainty of employment.
By the way only goverments can buy weapons in this economy not the general public and with regards the healthcare sector well lets be honest the percentage of people who can afford private care is small compared to the National Health service and yet again if you are in touch with the majority of people you will realise this is also under goverment control and yes only important or required purchasing are on the remit.
Though some suggestions have been made to offer low cost if not zero rated loans to all the public upto an agreed limit may kick start the economy this makes sense as long as everyone realises they have to pay it back and this could be done by the borrower agreeing to have a percentage point put on their tax code until the money is paid back.
Get this though the banks and especially credit companies then would be against this as they would be down on profits hence your choice of goverment will restrict the way you kick start your own economy if you get my drift.
There is another reason that people become unemployed that appears to have been overlooked and is under-represented, which is unemployment resulting from disability.
The transition time taken from the time the disability occurred when the person draws on disability payments, transition into finding work suitable for that persons disability, transferable skills, the ergonomic and environmental needs.
Psychosocial costs, anxiety and stress, the need for counselling, occupation health and physiotherapy must also be included.
Not to mention the economical strain on individuals and organisations.
Perhaps you can find a way to incorporate this under-representation into your economics.
Hi,
I’ve recently been studying monetarism and I have a question with regards to printing money. It is well known than printing money leads to inflation as demonstrated by the Fisher equation, but say if the new money created was all spent on imports i.e. all the newly printed money leaked from the domestic economy, would printing money in this scenario still lead to inflation? I am inclined to say yes because of an appreciation of the exchange rate due to increased expenditure on imports, but I would like some clarification and I would also like to hear from your ideas and thoughts.
Thank you!
Could you please answer the following question;
What are the advantages and dis advantages of micro finance in emerging economies?
Regards…..
I would like to ask you what are the role of banks in the UK? If you give me the ansewr with statistics I will be so glad……
Hi!
I have a school assignment on the following question
i was wondering if you could please provide me with some notes or sample answers which could help me with my submission
The questions is:-
DISCUSS THE POSITIVE AND NEGATIVE IMPACTS OF A RISING DOLLAR ON THE AUSTRALIAN ECONOMY
my question is what is the impact of quantitative easing on international trade for the country who set up a QE policy ?
Thank you
Well, anyway, if Moore’s Law says computer processing power and
digital data storage doubles every two years, and the cost to produce
a fab doubles every two years, then why do prices stay the same?
I mean, if we’re getting twice the benefit and their costs double,
shouldn’t the price be going up?
I’m not sure what a fab is. But, it depends on the importance of the relative costs. e.g. processing power may be more important as a % of total costs than other raw materials. Also, there may be other factors affecting costs, such as transport costs and increased economies of scale
How can government spending cause a concern for ;
-economic growth
- employment
- interest rates
how can defined in economics in simple words
Im trying to complete my essay on: Assess the contention that increasing the level of exports can reduce unemployment.
Would you recommend me including the Keynesian model, if so.. would you be able to explain it somehow and break it down?
Many thanks, Oliver.
1. what is real resources and real cost ?
2. what is the real cost to society of unemployed resources ?
1> what is real resources and real cost ?
2. what is the real cost to society of unemployed resources ?
Why can’t central banks guarantee all bank deposits, instead of just having deposit insurance with deposits guaranteed up till a certain amount only?
The cost of doing so will be minimal since they can print unlimited amounts, or just credit the accounts easily.
Hello! Can you please explain the effects of restrictive practices on consumers, businesses, prices, competition ?
What could be the reasons for some countries not having much success with the use of policy tools in boosting economies and human development
Greetings ,
I am struggling to find a breakdown of the U.K’s external debt.
I have came across many percentage charts etc but no detailed Breakdown of this.
Could you advise me on whre to access this information please .
Many thanks Kerry-Anne Karlsson
Can you please tell me if there is a relation between a prosperous economy and a large number of occupations
Like in the Indus Valley civilisation, they say that we can tell that they had a prosperous economy because they had a large number of occupations
Is there any economic logic to that or is the logic off?
What is austerity?
I was just wondering if i’m a student taking CIE for Economics, is CIE’s syllabus and marking scheme compatible with the AS model essay that i’m planning to purchase? Due to the fact that it might be AQA or Edexcel?
I m Y9 student in international school, next year I have to start my IGCSE. My school forces us to choose between economics and business studies. My dad cheers for business studies (because he runs business), however I m still hesitate what subject to choose.
If I learn economics, in the future what occupation can i take? is it true that Unis prefers students who take economics rather than business studies? Which subject is used in real life? Which subject is benefit in real life?
I m extremely anxious with the choices! :’(
I m Y9 student in international school, next year I have to start my IGCSE. My school forces us to choose between economics and business studies. My dad cheers for business studies (because he runs business), however I m still hesitate what subject to choose.
If I learn economics, in the future what occupation can i take? ‘
Pretty much anything you want.
is it true that Unis prefers students who take economics rather than business studies?
Yes, I’ve heard that, not sure how true it is. But, generally economics seen as slightly more academic.
Which subject is used in real life?
both
Which subject is benefit in real life?
both
I m extremely anxious with the choices! :’(
Don’t be. It doesn’t make a huge difference. I’d say choose the subject which interests you the most, if you don’t know which subjet to do, just do economics!
http://www.economicshelp.org/blog/wp-admin/post.php?post=653&action=edit
Richard Drayton, the Professor of Imperial History at Kings College London, says in a letter to the London Review of Books:
“What is clear is that in May 2010 the percentage of UK GDP which went to servicing debt, even after the impact of the 2008 crisis, was, at 2.5 per cent, at the lowest level enjoyed by any Conservative government since Lord Salisbury was at the Treasury in 1900.”
http://www.lrb.co.uk/v35/n02/letters
Is he right?
Yes. http://www.economicshelp.org/blog/3028/economics/interest-payments-on-uk-debt/
Bond yields have fallen since start of crisis because savings has increased
http://www.economicshelp.org/blog/5604/economics/uk-bond-yields-explained/
Is the demand for chinese solar panels in China, elastic or inelastic?
is the demand for chinese solar panels in China elastic or inelastic?
Hi,
I was just wondering what your opinion was on inflation targeting and exchange rates.
It is my understanding that targeting takes precedent over more tangible (and important) factors such as unemployment, growth and balance of payments (imports keep a lid on inflation and helped create Britains ‘NICE’ decade). You can understand this as the threat of stagflation of return is very real and visceral.
However with ‘free’ floating international exchange rates I question targeting’s relevance. Exchange rates reflect the competitiveness of a country and although there are obviously countless other problems associated with inflation as long as exchange rates respond to any changes in the price level a countries trade balance should not be adversely.
What is your opinion on the relationship between exchange rates and inflation and whether this is natural market reaction could stem future inflationary problems?
Thanks for your help, I complete my A2 this year and hope to aim for an A* with your site!
Cheers,
George
What are the main differences between Gross Fixed Investment (GFI) & Gross Fixed Capital Formation?
Can you please differentiate between micro econimics and macro economics?. I am a IGCSE O’Level student.
micro economics deals with the economy surrounding a single business entity like economies of scale and all whereas macro economics deals with the whole economic system of a country like gvt policies, inflation, interest rates, employment, GDP, GNP and so on
If the central bank reduces the supply of loans to commercial banks, what is the effect on the reserves held by commercial banks at the central bank?
What economic question(s) does this case require the town to ask? (2 points)
2. List the possible resources that the town would need to construct and maintain the park. (2
points)
3. What town resource(s) are scarce? (1 points)
4. Who will be the consumers using this public good? (2 points)
5. What is the opportunity cost of building this park? Explain. (5 points)
6. Identify at least one pro and one con for each of the following options: (5 points)
a. leaving the land undeveloped
b. selling the land to real estate developers to build homes
7. What, if any, market failures might exist in this town? Explain. (3 points)
8. Create a chart that identifies the positive and negative externalities of building the
park. Explain the effect of each externality. (Hint: You may use the charts on pp.
64−65 as a guideline.) (6 points)
9. How could the town government counteract the negative externalities? (3 points)
10. Based on your studies of Unit 1, write a persuasive argument for or against the
construction of the dog park. Provide a minimum of three supporting details and elaborate on
each to support your position. Your answer should include economic
terms when appropriate and should be written in paragraph form. (16 points)
Hello! I was just wondering in the midst of the European crisis when all economically strong countries have been downgraded how can Germany show a surplus? I mean I can understand that German exports have always been their main source of income , but with all the world exports shifting to China and India wouldn’t we expect the German exports to decline? Thanks!
To increase its labour force from 50 to 51 workers, a firm has to increase the daily wage rate from $600 to $610. What is the marginal cost of labour per day?
A $10 B $510 C $610 D $1110
I’m struggling with the answer. I know it’s $1110, but isn’t marginal cost just
Change in price / change in unit of labour?
That would make it $10 (as the marginal cost)
However, if you times 10 by the new unit cost, if the $10 isn’t the answer, that would make it $510. Or you may think that the new unit cost is $610 itself! However, why is it $1110?
Hello!
Maybe you will have a chance to consider this question, it is really bugging me. It’s from an US perspective, but I think it would be valid internationally.
I came across the following blurb in an article on Politico…
“Goldman Sachs economists took a measured stance in a recent note, arguing that ‘while a failure to raise the debt limit should not have implications for the Treasury’s ability to make interest payments or to redeem existing securities, it could lead to a sharp reduction in spending.’ ”
This raises a question in general about the relationship between government borrowing, government spending, and the stimulus effect such activities may have.
If the US Government, for example, borrowed $1 Trillion less, wouldn’t this money just get spent somewhere else? That is, if government borrowing is actually borrowing, and not printing/creating money by another name, doesn’t the money have to already exist? Wasn’t it going to be invested somewhere?
I really don’t have a political agenda on this question, I just want to understand what is actually happening. You have a separate post that does a good job at explaining why government borrowing is NOT the same as printing money, and the inflationary downsides of printing money, but I’m having a hard time seeing how, for example, government spending could be consider a stimulus to the economy if it is all borrowed money in the first place.
As an aside, I can see how borrowing money from, say, China, and then spending it in the US could stimulate the US economy, but my understanding is that the only about half of the US debt is held by non US interests.
Also, I can see that a lot of US debt is held by the US Federal Reserve, but unless the Federal Reserve is printing money, they have to get it from somewhere too.
I suspect that this is ultimately related to fractional reserve banking, and that by borrowing money the US Government is, in a way, creating money, because the people we are borrowing from don’t technically have it in their vaults, and that when we pay off the government debt this is, in essence, taking money out of circulation. But the link is hazy.
Thanks for your wonderful blog.
In reply to my question, above…I did locate your article here…
http://www.economicshelp.org/blog/1368/economics/keynesian-stimulus/
This goes a long way to explaining the stimulus value of government borrrowing. The idea is that, in a recession, there is literally a bunch of money sitting in bank vaults doing nothing at all. The government takes that money and spreads it around, keeping it moving.
So let me rephrase my question above. In a non-recession situation, if a government reduces it’s borrowing and thus it’s spending, how can that have a depressing effect on the economy? Wouldn’t that money be either be loaned to someone else or spent to on goods and services by the people who have it?
i want detailed information on constituents of organized sector??? plz help cant find much…
Is giffen good the same as luxury?
Basically i just do not understand how you can calculate the Price elasticity of demand and supply without the quantity. However the question is as follows:
In 2009 and 2010 the US government instituted a program where all first-time homebuyers received an $8,000 tax credit upon the purchase of a new house. In April 2010, just prior to the credit’s expiration, sales rose 7.6% and the median US home price rose 4% to from $167,000 to $174.000. Assume that all buyers received the $8,000 subsidy.
Assuming that all buyers received the credit, estimate the own price elasticity of demand and own price elasticity of supply
Hi,
Printing money is not a solution if the production of agri+goods+services don’t increase but to install new capacity to increase production, why can’t a government print money?
After all money is just a medium to enable transactions in the economy…isn’t it?
Let us say there are USD 100 million in an economy based on Agri + Manufacturing + Services. The govt. intends to develops 10 islands into top tourist destinations in 3 years. So the economic output will be now Agri+Manufacturing+Services+Tourism.
Don’t you think Govt. will inject extra money in the system if the prices of all the other things don’t decrease…?
So a simple question as above why don’t govt. increase the installed capacity where demand far outstrips the supply just by printing more money.
Many thanks
PK jindal g every problem have different solution.
No doubt govt has problem of development etc
But some time govt also have problem to finance for its needs. Govt can take loans for this but it is enough
So govt need to print money as it is very easy method to finance.
what is company tax
Tax which is payable by companies which are register under this act
what are some economic advancements that has contributed to the growth of Public Relations?
Accoreding to the Keynesian Cross model how rising consumer credit can stimulate an expansion of the US macro economy.?
According to the Keynesian cross model what is the impact on the UK macro economy of the Bank of England’s decision to keep interest rates at 0.5%? Such a policy can spur economic growth in the UK economy?
Simply low interest rate will help in increasing business cycle and increase economic growth
In this era, Inflation had gotten really high specially in countries like Pakistan. Hows will the Inflation level go down ? or will it even let the country develop ?
Once inflation rises it keeps on going.
Abdulla g Salam balekum
Do not relate inflation in Pakistaan with development of Pakistaan. Actually in practically inflation is not only responsible for development etc.
In reality Inflation itself is a side effect of Bad economic policies in Pakistan & Poor economic environment in country .
Like Inflation, low economic development itself a product of bad economic policies and poor economic environment . So you can not blame inflation for this as both inflation and low development are brother , their father bad economic policies is responsible.
in this age of technology, where every manpower is being replaced with machine… does the wage-price inflation theory still hold any relevance?
what is the author of this website or the founder.
http://www.economicshelp.org/blog/about
So there’s an article about how a company wants to expand its services overseas to another country.
I don’t get what will happen to the supply and demand curve. There has to be two – one for the present time and one for the future because as time changes, it has to change.
In other words, there has to be two supply/demand curves to show now and later in the future.
I know that the company will do horrible right now (since they have to pay for all the “building” of the companies) but they will do better in the future but I don’t know how to illustrate this.
After reading the blog post of the ‘UK budget deficit’, I was a bit confused at the end about how public finances will be improved in the short term, but in the long term it will be a detriment to the budget balance because of an increase in interest rates. Could you possibly explain why this increase in interest rates will lead to the bank making a loss and could you explain a bit more about how the asset purchasing facility works and how it is relate to QE?
Thank you!
i am reading articles about the assessment of competitiveness at macro and micro levels
and how the firm or country become competitive and i found many and many indicators about measuring the competitiveness throw the macro level (country level)
but my Question is wt is the possible problems of measuring the competitiveness depending on macro level??
thank you in advance
I’m currently reading ‘Crisis Economics’ at the moment and i don’t get some stuff in the book. When it was talking about the current account balance, the book referred to it as a balance between national savings and national investment, but i don’t quite understand this. Also, what’s the difference between income and current transfers of the current account and just the capital account? And one more thing, why is the capital account equaled to the change in reserves of the central bank? Please can you help?
Thank you!!!
http://www.economicshelp.org/blog/6411/economics/current-account-savings-investment/
> Also, what’s the difference between income and current transfers of the current account and just the capital account?
The current account includes net incomes. So if you earn income from your foreign direct investment, this income is counted on the current account. But, the direct investment itself is on the financial account.
e.g. Japan invest in building new factor – this is credit on financial account. If they repatriate profits to japan, this counts as debit on current account (net investment incomes)
Hi could you please discuss your views towards trade liberalisation and whether its good for economic development.
I will be presenting to group of colleagues of mine and its quite a compicated subject to discuss, so i would really appreciate your views on this topic.
Also could you suggest a “economic model” which i can possibly use to explain this topic.
Thank you
I have one for you. Discuss Keynesian view and classical view (self-correcting mechanism) of a policy to help an economy recover from recession. Could you also use a AS/AD graph to support the answer as well as your personal opinion on which policy you think is appropriate and why?
Thanks!
I was reading on BBC News about the Brazilian president vetoing the part of the law to distribute the royalties gained from Brazil’s oil fields across the 26 states. I was wondering if you could explain what royalties are and why distributing them is such a bad thing from the perspective of the Brazilian government? Below is the link to the article:
http://www.bbc.co.uk/news/business-20562691
Thank you!
What are the possible effects when a company puts itself up for sale?
Possible scenarios include intense competition, undervalued assets, declining profits/stagnant growth, liquidity issues.
How would shareholders/management/lenders/suppliers/clients respond?
Would there be a drop in business, lending halt, recruitment freeze etc?
Are there problems with the concept of trying to value co2 reduction?
After the insightful post on ‘Italian Economic Decline’, I was particularly captured by the % debt to GDP line graph of the different developed countries. The one thing that really caught my eye was Japan’s huge % debt to GDP and yet their government bond yields are consistently declining. Aren’t the markets worried that Japan may default on their debt someday or is the fact that they have a lender of last resort (no fear of liquidity problems) unlike Italy and their 0% interest rates shielding them from augmenting yields?
Who ‘loses’ when central banks expand their balance sheet extensively, via unlimited asset purchases, or write down their losses” e.g the recent BOJ losses, since the capital can easily be recreated again?
What are the benefits/disadvantages of growing ownership of central banks/government in the economy?
I’ve recently been looking up on the Eurozone financial crisis for random reasons and i don’t understand the statement in an FT article about what we must acknowledge in order to overcome the Eurozone problems. The statement goes ‘no country can be expected to generate huge primary surpluses for long periods for the benefit of foreign creditors’. Please can you help?!
The link of the FT article of this quote is below.
http://www.ft.com/cms/s/2/324f9054-b0a7-11e0-a5a7-00144feab49a.html#axzz2ChejBoKm
Hi i just wanted to know your views on trade liberalisation and whether you believe it fuels economic development.
Trade liberalisation as a topic is quite difficult to explain and examine, so i also wanted to know if there are any Economic Models which can help explain this concept.
Thank you
HI,
Im not quite sure on the concept of financial intermediaries, i want to know how they reduce infomation and transaction costs for the investor?? also does the financial intermediaries experience any downfall from this.. etc etc
am half way through writing a really long speech and the last segment of my speech will consist on this topic. Hence the help will be really appreciated by a few hundred people listening to this presentation including me.
Thank-You Very Much Economicshelp.org
Suppose a technological advance reduces the cost of making computers.
a. Draw a supply-and-demand diagram to show what happens to price, quantity, consumer surplus, and producer surplus in the market for computers.
Weather india may proceed to ,as developed country in next fify year ?
What do people mean by countries/society/financial implosion? What are the characteristics and examples? What are some possible causes and effects?
hi i want to know the major causes of unemployment in Europe and why it increased day by day.
Hello Tejvan,
I wonder if you could possibly help with the problem we encountered when were tying to calculate PED and a change in TR in a random example.
By taking random numbers we have found ourselves in a situation where TR has not increased when the price increased, given that D was price inelastic.
The figures are as follows: the price increased from 10-20, whilst QD had fallen from 10-5 units. Surely, it gives PED of -0.5. This suggests that D is price inelastic, hence TR should have increased. But it did not. Before the price was raised it equalled: 10×10=100 and after the rise in price: 20×5=100. It remained constant. Could you possibly explain why this has occurred? All textbooks say that TR should increase when P is raised and D is price inelastic. It should work for any numbers as we can draw a demand curve through these two points (whether a straight line or hyperbolic). Does this imply that if demand is price inelastic and P rises TR may EITHER increase or stay the same, or is there a much complicated answer?
Thank you!
(ESSAY) Normative statement: Foreign direct investments into the copper industry in Zambia will ensure prosperity for the zambian people.
Analyse from elasticities point of view.
1. Explore the question, defining the key terms
2. Diagrams,
Written analysis incorporating the diagrams
Real world examples.
3. Evaluation
Prioritise the arguments
Order the stakeholders
Long run, short run effects
Analyse with diagram using an alternative theory or perspective.
Guys this is my assignment for economics, I need help as I do not really know what to do for the different steps, can anyone give me advice. Especially real world examples and what kind of graph etc.
Hi there! I have 3 questions! First is on microeconomics. When market fail happened, government can intervene to promote efficiency and equity. How government can intervene? & in what way?
Another question is about macroeconomics – market for loanable funds in open economy. If the interest rate above the equilibrium level, quantity of loanable fund supplied would be more than the quantity demanded. So there will be a surplus on loanable fund but why it will drive the interest rate downward?
Last question is about the implication of purchasing-power parity. The given example in the Mankiw textbook : Suppose that P is the price of a basket of goods in the US (measured in dollars), P* is the price of a basket of goods in Japan (measured in yen), and e is the nominal exchange rate (the number of a yen a dollar can buy). Now consider the quantity of goods a dollar can buy at home and abroad. At home, the price level is P, so the purchasing power of $1 at home is 1/P. That is a dollar can buy 1/P quantity of goods. Abroad, a dollar can be exchanged into e units of foreign currency, which in turn have purchasing power e/P*. For the purchasing power of a dollar to be the same in the two countries, it must be 1 = eP/P*.
I do not understand the equation and the example. any more simpler example?
Thank you so much!!!
Hi Tejvan,
My first memories are of the early 1970′s – some 40 years ago. Since then the per capita, inflation corrected GDP for the UK has more than double. In my naive understanding of economics this means that we are now producing and consuming twice as many goods and services. Perhaps we could be considered twice as ‘efficient’ as we were or to be working twice as hard?
The inflation corrected median salary hasn’t changed much.
When I compare my life with my fathers at that time the conditions are near identical in the greater things or life. I work the same hours, maybe more. I have the same holidays. I have a similar standard of material comfort (a washing machine, a car, heating, a beer when I want one) although with a lot more ‘stuff’ in terms of gagets (TVs computers etc). My father retired at 60. I’ll have to work to 67.
There is much emphasis put on growth in the economy yet over this period a *doubling* in the size of the economy has not given me (and the vast majority of people like me) any major advantages in terms of free time or choice of what to do with my life.
Accounts I read on economic growth don’t address my fundamental question about why we should have a growing economy when such major changes in GDP over the medium term seem to have little effect on real people’s lives.
Increasing efficiency in production should lead to a reduced demand for labour and more free time or greater unemployment but never does. We need fewer people on the land, fewer people in our factories and now fewer people to administer things or even work in shops. Where are new jobs coming from? Are they all ‘make weight’ jobs designed to justify distribution of wealth created by a small section of the populous?
Put simply, other than consumer confidence, why do we need to have more valuable transactions tomorrow than today? It is easy to see why growth is necessary in a developing economy where basic need aren’t met and growth means more food but why do we need it in a modern western economy?
Sorry such a long preamble to a short question.
Many thanks,
Roger
Qith the amount of quantitative easing which is going on why aren’t we seeing rampant inflation? What’s the difference between simply printing money, ie “Helicopter money” and quantitative easing?
Hi. I do not really understand the implication of purchasing power parity on the equation. e=P*/P. Any easy example to explain? My textbook did give an example but i do not understand this one part, It says “At home, the price level is P, so the PP of $1 at home is 1/P That is a dollar can buy 1/P quantity of goods” – Why is it 1/P?
“If the purchasing power of a dollar is always the same at home and abroad, then the real exchange rate cannot change.” Why RER cannot change? Hope to get your reply soon. Thank you
my question is If the U.K. had joined the euro back when it first started would the U.K. have benefited like Germany or would we be in the same situation as Greece, Italy, and Spain
It’s hard to say. The maket attitudes towards debt levels depends upon the amount of debt relative to GDP and the overall strangth and confidence in their economies.
Greece ran up huge debts relative to the Greek GDP, but so has California! Equally, California, like Greece, is not allowed to default and can not debvalue its currency. However, the markets have serious doubts about the competitiveness of the Greek economy, and heance their ability to honour their debt commitments. By contrast, calafornia is the USA’s richest state and has a very competitive economy. The markets aren’t worried about California.
The economist Niall Ferguson points out that the danger point for debt levels in each country vary, but that each country does have one. If the USA continues having a deficit of a trillion dollars per year it will eventually get into the Greek situation, but who knows when that will be? Maybe its a few years from now, maybe it’s decades away, but if that deficit continues it will hit the danger point.
Britain is a much more competitive country than Greece. The markets would probably not have called time on the UK economy yet, but it’s impossible to tell, and not easy to see coming!
Hi,
What is the likely impact of monetary policy on the financial markets today?
We hear much about the “pensions time bomb”, as people tend to live longer and there is a bulge as “baby boomers” reach retirement age. We also hear much about the need to save for retirement.
Saving *money* may mean people have more money in retirement but surely the real problem is to ensure there is more output; money is worth only what it can buy.
Is there a risk that money saving will simply simply reduce current output and so reduce the income and incentives needed to ensure we have the investment that will enable us to increase output over time?
It is easy to see how it makes sense for an individual to save for retirement but at the national level it may be counterproductive.
Hi, May i know some examples to form a good ratio for domestic economy?
Currently, this is my idea…..”Domestic economy – avg personal income / GDP per capita”
What are the main links between crime and a stagnating economy? (Speculation of an increase due to rioting in 2011)
An economy can’t function without the rule of law. However the whole situation is a spectrum. We see good law enforcment in western countries, heance their economic performances.
What government policies and proposals are in place to reduce our deficit? and where can i find some information about it? websites, agencies ect…
When a government has a budget deficit, the demand for loanable funds will increase as the government needs a way to finance it. Does the supply of loanable funds remain constant or does it decrease as the government has a deficit instead of the surplus ?
supply of loan-able funds will increase as govt will issue govt-bonds to
Hi there,
I am starting a dissertation in the field of Economics, however I am unsure as to what would be a good topic to base it around? There are a few out there, i.e. the Crisis of 2008, however that would be a bit too cliche. I was considering evaluating whether Britain has actually come out of recession and the necessary steps that would need to be taken in my opinion to do so, however I believe this would bring on a political side in which I am not sure if I have the capabilities to handle! Would appreciate your opinion.
Thanks
Sam
My instinct would be to avoid the question of whether Britain is out of recession.
There are so many variables, euro instability, USA fiscal cliff, competitiveness, the rise of China, the public and private debt burden, the rise of the baby boomers and the long term financial crisis, the real value of degrees from universities and the skills of workforces, the decline in value of unskilled labour and what to do about it…
My instinct would be to go smaller and analyse one specific poilicy and it’s effectivness in practice.
Hi and thanks for your article “UK Budget Deficit”.
I am ‘new’ to economics, but trying to do my bit to get to understand it all.
From your article I followed links and found the ”Pocket DataBank” published by the treasury.
Being a bit retentive about things, I tend to learn by adding things up, and if I my total matches published totals, then I know I’ve understood things correctly.
Do you know this publication well at all ?
I got confused on tables 11A & 11b
On 11a, I found:
“FINANCIAL YEAR PUBLIC SECTOR BORROWING FIGURES (£ billion) >> Net Borrowing (ANNX) 2011/12″ = -123.8bn
But on 11b, it says
“PUBLIC SECTOR NET BORROWING (J5II) 2011/12″ = 124.7
And then your article quotes £119.3 billion
Would you be able to help me understand the differences?
I think this is half the reason why people get disengaged with politics/economics .. the same question always has a dozen different answers !
Sorry if this Q is a bit mad … if it’s not in your area, feel free to delete my post.
I’m not in the game of showing people up, but grateful if they can help !
Many Thanks
Simon
Hi Simon,
It’s a good question. I just looked at ons and they say
In 2011/12 public sector net borrowing was £121.6 billion; this is £4.4 billion lower than the Office for Budget Responsibility (OBR) forecasted net borrowing for 2011/12 of £126.0 billion
http://www.ons.gov.uk/ons/rel/psa/public-sector-finances/sept-2012/stb—september-2012.html
so that’s a 4th version to throw into the mix.
If you download the data set at ons – you will see even more complicated tables and different versions of essentially the same thing.
Usually for series like public borrowing there are several versions, e.g. seasonally adjusted. real prices e.t.c, exc financial intervention. Borrowing is particularly difficult because it depends how you measure it – net borrowing, gross borrowing, borrowing according to Maastrict criteria e.t.c
I try to use the same stats, but it’s inevitable to come across different versions. That’s just the way it is.
If you really want to set your head spinning, I once tried to quantify all the different versions of debt statistics, but even that is now incomplete.
http://www.economicshelp.org/blog/1225/uk-economy/understanding-government-debt-statistics/
Basically, don’t worry too much about slight variations in data!
why did gols soar to record price in 2011 than drop in 2012
Drear Pettinger,
I have a question about regulation in the financial system. Today, many people are talking about regulation in the financial system, for example bank regulation .
So, what is mean by regulation. And also what is the advantages and disadvantages of regulation. I would be happy to answer my question.
Thank you
Why is emphasis placed on value maximisation rather than sales maximisation?
Because you get make more money for less work. If you make the same profit from selling 50% less stock then you overall have made the same money for less work. It’s simply more efficient.
Explain the motivations managers may seek to maximize sales rather than profit.
Maximising sales over profit has one major benefit. People don’t like being ripped off, so if they feel you are making too much profit they will run a mile! Making a little profit on lots of sales therefore removes this problem.
what would a European Banking Union consist of?
what do we call food additives tat are added intenyionally to food products
Hi. I have a few questions because i do not understand the whole texts on my textbook. The textbook is Economics for Today by Allan Layton, TIm Robinson and Irvin B tucker. Topic on Monopoly. The part of Economies scale.
As a result of large-scale production, the long-run average cost of production falls. This means that a monopoly can emerge in time naturally because of the relationship between average cost and the scale of an operation (Why? I don’t understand) As a firm become larger, its cost per unit of output is lower than it would be for a smaller competitor. In the long run, this ” survival of the fittest” cost advantage forces the smaller firms to leave the industry. Because new firms cannot hope to produce and sell quantities of output similar to that of the monopolist, thereby achieving the low costs of the monopolist, they will not enter the industry. (I don’t understand that part too. )
What is natural monopoly? Why it will produce output at a lower per-unit cost than two or more firms in the industry? and why for the graph of minimising costs in a natural monopoly, as there are more firms, quantity of output decrease yet the cost per unit is higher?
Sorry, i do not have any economic background before so I am really confuse after reading the textbook :s I would appreciate it a lot if you can make it easier for me to understand. Thank you.
A natural monopoly is a company in which there is not likely to be much comptition.
Electiricty distribution is a good example.
It’s very inefficient to have competition. You only really need one country wide electiricity distribution grid The costs to all consumers overall of maintaining two electiricity distribution networks would negate any savings made through competition.
It is therefore more sensible to simply have one electiricty distribution network.
please show the value based questioned to be asked in board exam in economics 2013
what are the reasons for countries overvalued their currency exchange rate
how to measure the macroeconomic imbalances
hello Mr. Pettinger:
As you know the British government tended to use policy of quantitative easing to solve the UK’s current economic problems somehow, so I would like to ask you has this policy solved any problems and what are the negative and positive impacts of quantitative easing.
Best regards
http://www.economicshelp.org/blog/1047/economics/quantitative-easing/ – with a look at impact during 2008-12
http://www.economicshelp.org/blog/4682/economics/problems-of-quantitative-easing/ – problems
What are the tools available to address macroeconomic imbalance generated by the unsustainable fiscal deficits
Thanks for your message. Please,what is unemployment rate in UK?
Why is it, that some countries e.g USA, UK, Japan etc can electroniclly create money whereas India, Germany, Euro etc have to work, trade and manufacture exports and growth to keep pace with the above mentioned ? Is it because they are white,speak with a plumb in their mouths, and generally BS to gain creditability ?
How does Australia’s RBA manmage the Economy ( the envy of the World ) so successfully ? Do they keep intyerest rates high as compared with the USA, to attract overseas earnings and investments and profit thereby ? Or do they print money also ? I notice they have special drawing rights with the IMF, and World Bank, which they draw on, and which the greatest contributer is the US & UK, which has an endless supply of fiat currency ?
Pls explain succintly. I am at my wits end explaining Economics to my students. For that matter, why is the European Common Market suffering, if it was that easy to print money ?
Think of it this way, you ahve a fire in your kitchen. (Not an oil fire). add some water, enough to put out the fire. Great, you’ve eliminated the fire. Flooding the kitchen would also put out the fire, but it would also completely ruin the kitchen. It’s important not to go too far!
What are the main problems of the UK current economy situation?
I’ll be so glad if I see some answers…
Best regards
Why got the raw materials more expensive in Spain after EU entry? i mean by changing curency..
A poorer country with a weaker economy has a weaker currency. A richer country with a larger economy has a stronger currency.
The UK pound or the USA dollar, or the German Mark (before their joining the Euro) were among the worlds strongest currencies. by contrast Vietnam is one of the worlds weakest economies and the Vietnamese Dong is a weak currency. It doesn’t take many USA Dollars to buy lots of Vietnamese Dong so Vietnamese products are very cheap.
The Spanish peseta was a weaker currency than the USA/UK/German currencies I mentioned, so Spanish goods were relativley cheap.
When Spain joined the Euro it now found itself with one of the world’s strongest currencies, so it’s goods were now much more expensive to those converting their GBP or USA dollars to Euros.
What do Investment banks actually do?
I’m currently on the topic of GDP.
I’m confused with the Per capita GDP.Is it related to the Real GDP and does it considered the price change??
per capita is per person.
Real GDP takes into account inflation.
http://www.economicshelp.org/dictionary/r/real-gdp-capita.html
What would happen if major currency gets backed by gold again?
what are some solutions to curb unemployment?
What should government do to improve the American standard of living?
what are the disadvantages and advantages of agrarian reform?
I came across this article (link: http://www.mumbaimirror.com/article/44/20120707201207070100431597a0f3243/Those-80000-unsold-flats.html) which says that there are 80,000 flats lying unsold in Mumbai and another 50-100k flats that are unoccupied. The average price of each flat is around 1.2 crores (12 million). However, there are new projects coming up daily and the prices keep on soaring. The author says that the prices are unlikely to fall though there is no demand for such flats because flats are not perishable commodities. I find this to be against the law of demand and supply. However, I would like to find out from you whether the author’s economic logic is correct or dodgy.
Will appreciate if you will enlighten me.
Thanks and best wishes.
what is the role of the subsidies and the indirect taxes on the economic welfare? please i need any papers on this topic or your point of view about that>
Does intervention by the FED and ECB create arbitrage opportunities, and ultimately be ineffective?
For example, if the FED intervenes in bonds, and mortgage rates, can an investor collectively invest on the other side of the transaction, knowing well there will always be demand on the other side from the FED and ECB?
i.e if the FED buys bonds, the investor shorts the bonds.
In this sense, would the FED and ECB money effectively end up in the hands of the sophisticated investor, and not filter down to the wider economy?
Do price controls ultimately lead to arbitrage opportunities? If this is so. then when do price controls break down?
Could you please explain what capacity utilization is and What is the relationship between utilisation and firms with excess cash?
I would like your help in answering a querry of mine………Is foreign exchange rate an indicator of economic growth?? pls reply
Have you ever heard of Michael Mainelli? He has quite a gifted mind when it comes to the topic of economics. I recommend his book The Price of Fish
http://www.ebay.co.uk/itm/200812756681?ssPageName=STRK:MESELX:IT&_trksid=p3984.m1555.l2649#ht_507wt_1186
Hi,
I have a questions with regards to subsidy and price ceilings. What do you think the impact will be if a government decides to subsidize part of a tution fee and at the same time mandates a price ceiling below the average? For example. Let’s say the tuition is $10.000. The government will subsidize $2000 and the price ceiling is $8000. Let me know the impact on # of students that want to attend universities, # of universities, etc.
Thanks
Which is the best way to value an IT services company?
Assuming revenue, profit, sales, P/E is flat for many years and the future
What is the average valuation for an IT company and which metric is most used?
Assuming growth, how is this taken into account, e.g 20% growth, do you pay 20% more?
If you get different valuations on different metrics, do you average them up and quote the price?
e.g (valuation by revenue+valuation by P/E ) divide 2
Which metric would you choose and why, e.g P/E, Revenue, EBIT, Profit after tax.
How do people set benchmarks on valuations?
Which valuations are used for other industries and why?
There is no fix rule about it . Some investor are more interest in book value , some watch profit growth and many other things.
Generally some things which make big effect on market price of shares are reputation of company , profit and debt company have borrowed.
Fundamentally no book or study can tell you what will be future price of a stock not even Barren Buffet . It is just knowledge and you can play gamble with some knowledge which will increase your probability.
The Bank of England holds around a third of the outstanding Government Debt. The Bank of England is wholly owned by the Government.
When the Government pays interest to the Bank, does that count as public spending? Isn’t the money just going out of one department into another?
Why can’t the Bank just cancel the debt? Massive debt reduction at a stroke.
Yes interest paid to bank is being counted as public spending. Govt took loan from bank for
works of public and pays interest for loans it takes from central bank.
In economics view Govt and Central Bank are separate entities but from political angle both are same.
Payment of internal debt is not a main problem for government but problem is budget deficit and money supply. Even bank cut all govt debt , it will not make any important effect on situation because it will increase deficit.
Yes if debt is external and foreign banks make free from debt in foreign currency , it will be very effective.
who or what is the source of these borrowed monies by the governments?
What happen if the governments can not pay these debts?(As you see these debts not only reduce year after year but increase year after year)
What happen to a firm’s production cost in the long run? and how economies of scale can be achieved?
Hello. Can you please tell me the similarities and differences between classical and neo-classical economics?
Can there be economic growth without an increase in money supply? Can there be growth with zero inflation? Even with zero inflation, does this mean current money is buying less in the future, compared to a zero sum economy, as the money supply is still increasing, but at a rate corresponding to real growth?
If a certain amount of inflation is desirable, by definition, does this mean that the purchasing power will reduce over the years, and a recession will be inevitable?
To what extent has privatisation wide share ownership in the UK?and are the wider share desirable?
What are the factors that decide the ratio of surplus value vs workers wages?
Why are some people paid 5% of profits, whereas others 50% of profits, assuming other costs are accounted for?
Does a completely free market cause serious wealth inequality?
Is it true that the worker have as much bargaining power over wages in a free market as employers, assuming not all people are born entrepreneurs?
I would like to find out more a bout the Eurozone, and also about the house market in Grece?
What is included in basic banking services? Are bank fees justified? Is there any checks against banks charging exorbitant fees? Why isn’t the spread between deposit and lending rates sufficient to cover for expenses of bank accounts?
Deposits, giving loans , facility of different type of accounts , Non cash money transactions like checks , demand draft etc are all basic services which are being given by a bank.
Yes central banks regulate charges of banks. No these charges are compulsory at some level but many banks charges more for their work which cannot be justified.
How does manipulating the LIBOR rate upwards improve the profits of the trading division of a bank?
What are the differences between California’s default in the US and Greece’s default in the EU? Why does Greece’s default have a greater impact on the euro than California had on the dollar?
There is big difference between California ‘s default and Greece ‘s default.
California is a fundamental part of US but Greece is politically separated from Euro Zone at some level. California shares common federal budget but every country in Europe has its own budget and European Budget does not play important role due to small scale.
If all Greeks native or from abroad (or any other country in debt) bought their own bonds would this make the debt much lower?
Not much lower but surely will help up to some level.
Is the spectre of inflation the only reason the FED doesn’t simply print the US out of its economic troubles? By print, I mean at least print enough to pay down the debt to a managable level, or create a major business incentive program using printed cash.
Hi,
In the Classical Model of Aggregate Supply, why do we assume that Money demand is interest inelastic for the model to work? (MV=PY to show aggregate demand)
Hi, I was just wondering what recapitalisation (specifically the recapitalisation of banks) actually involves?
Question from British civil servant:
Dear blog-brains: is there any credible source for, or way to ascertain, the proportion of an individual’s consumption of goods and services that refers to government-funded services, by some sort of income measure? (UK if possible)
The hypothesis is that the poorest have the biggest proportion of their consumption linked to govt-funded services. Sounds obvious, but we can’t see any stats for it.
If we can understand the extent to which poverty is linked to govt consumption, we can look at the prospect of giving people more power and choice thru reshaping govt services, rather than relying solely on welfare / income transfers n- so quite a big deal.
Many thanks!
What do you think about Argentinas economical future, with the current presidents politic and ~22% inflation, taken in mind?
This is hypothetical, but I wondered what would happen if we developed robots resembling humans who could perform any task a human could perform, but more effectively and essentially for free?
More specifically, how would this development affect employment and real per capita gdp, and what would the pros and cons be? What regulation, if any ,would be necessary?
Thanks!
what is meant by full employment
at about 28% explain why it may be necessary for government to maximum price control
Dear Mr.Pettinger,
With talk of a Greek exit from the euro,the situation is almost always compared to Argentina in the 1980s.Can you explain what happened there and how itb was resolved.
Would you be able to explain the Harrod-Domar growth model? In specific, what is the relation between warranted rate of growth and natural rate of growth?
Thank you.
analyse the effectiveness of international organisations e.g. IMF and WTO to help promote economic development.
thank you
Why is there differences in income distribution international?
(why are some more unequal etc)
Thank you, appreciated everything you do on the site.
Can you explain whether bad money really drives out good money? For example, the spain bond yields have increased because the 100B recently lent has got priority status over other older Spanish bonds.
Applying this concept, do later buyer of shares have more priority over earlier ones in regards to favorable terms, and does this also apply to the labor market in that newer recruits can command better salaries and terms over older workers?
How does the market distinguish ‘good money’ and ‘bad money’ assuming the ‘bad money’ are not counterfeits, like in precious metals cases?
Why does a change in price cause the demand for labour curve to shift out?
Since demand for labour is MPP x P , shouldn’t the change in price cause a change in slope?
Is it good policy for a company to maximize profit by e.g getting the cheapest possible deal, or worker, but thereby causing increased turnover or loss of renewable business when partners/workers discover they are being given a raw deal?
If there are unlimited business partners/worker pools, is it in business interests to maximise their gain,by paying lowest costs and salary?
What are the pro’s and cons and will this method of doing business harm its long term survival?
Can you explain what happens to wealth when e.g share price, property prices fall?
Do they just vanish in to thin air, or is money just being transferred from one person to another? In other words, are all investment a zero sum game?
What happens when prices rise?
Is there a simple example that can illustrate this concept?
Given the current environment, is it a valid argument of companies that increasing workers salaries will cause a loss of competitiveness?
For example, cutting entry level and middle level workers salary while increasing management salaries will not change the profit levels of a company much.
In currency investing, would it be more profitable to invest in a country with high interest rates and high inflation, or low to zero interest rates with low inflation? In other words, is the real interest rate more important than nominal? Other factors being equal, does it always mean that the currency of a country with higher real interest rate will strengthen over time compared to one with a lower real interest rate?
In reference to the current debt crises and possible solutions, what are the benefits/disadvantages of the following:
1. Central bank monetizing ALL the debts, and writing off its balance sheet-wouldn’t all the debt be resolved then?
2. Imposing negative nominal interest rates to force spending
3. Distributing unlimited cash directly to citizens instead of banks
hello, i’m stevy and i would like to you to help me to answer the questions which is going to follow:
1. What is the advantages to sell at higher price?
2. Would you explain to me the concept of price control and the trategie to deal with it? Thanks
Can someone please tell me what percent of the UK debt is held by the Bank of England?
Also is it true that
1) If debt is held by the Bank of England then we (the people) hold our own debt?
2) Interest paid to the Bank of England is really coming back to us?
3) Quantitative easing is really a way for the Bank of England (us) to buy up debt.
Thanks.
Mike
Following the austerity debate, what are the economic arguments for retrenchment? I know there are many against, i.e. the horizontal LM curve results in no interest rate crowding out with fiscal expansion, but I want to get a balanced perspective. What are the main arguments against retrenchment in economic terms?
Pls can you give the sample for the essay writing on the limitation on Economic Growth cos I want to start my essay but i don’t know how to start from.
Could you please explain how low bond yields can be a reflection of low economic growth and high savings?
Relationship Between unemployment & inflation in detail ?
can i get the advantages of an appreciation….thank
Hi,
I was wondering how you work out the productive and allocative efficiencies using a graph. For example, for allocative p=mc, which bit on the mc curve do you read from to say whether it is equal to it, as if you draw the p line across enough, surely it will always meet the mc line?
Thanks!
China uses its foreign exchange reserves to buy US dollar assets. This reduces value of Chinese currency and increases value of dollar.
How does buying us dollar assets reduce the value of chinese currency?
Why is top management salary considered excessive? If for example, the CEO salary is pegged to a 1% of profits, and the profits is 10billion a year, meaning the CEO salary is 100m is this excessive?
What drives profit sharing for various professions? Why do some people get 1-5% of revenue generated, whereas others get 10-30% of revenue?
If you are in the 1-5% bracket, is it possible to demand a 10-30% revenue generated as salary, assuming a company still makes money on that bracket? i..e is it possible to get wages way above market rates in the same industry?
If everybody base their salary on market rates, is it correct to say that the salary will never go up or down significantly as no employer will pay above market, and employees will not accept significantly below market rates?
Hi Tejvan
What is the impact of debt on the housing market in the UK? If the UK is in such a debt crisis, what impact has this had on the houisng market.
Regards
Abu
As an investor, is it better value to buy a listed company that has more or less number of shares? On one hand if a company makes profits, its worth more per share in a company with less shares, but if it loses money, the losses per share are increased also, compared to a company with more shares, assuming their assets are the same.
I don’t think it makes too much difference. Less number of shares, will just mean individual shares are worth more. E.g. you might buy £10,000 of shares in ICI. If they cost £1000 per share, you will just have 10. If they cost £1 per share, you will have 10,000. But, it’s the same value
What is the revision of tax brackets to prevent workers from paying more taxes due to inflation?
What are the disadvantages of minimum wage law?
http://www.economicshelp.org/labour-markets/disadvantages-minimum-wages.html
can i get the disadvantages of minimum wage law. additionally, if i can get it with reference to the current Liberian minimum wage law before the national legislature.
Should Greece pull out of the euro ? They are in the fifth year of recession despite EU bailouts it seems like pouring money down a black hole.
The Greek public apparently want to keep the euro but they dont want to pay for it.
Wouldn’t it just be easier to default on their debts and reinstate the drachma at a lower value than the euro ? This would boost exports and invite Tourism though im not sure what manufacturing Greece has to export.
If they defaulted could they be made to repay their debts at some point anyway or could they just declare themselves bankrupt like an individual and pay back little or nothing ? How does it work ?
If an individual goes bankrupt they generally cant have a bank account or credit for years but surely that wouldn’t apply to a nation.
I here of large withdrawals of euro by Greeks from their banks in panic but whats the point in that if they are not actually going to leave Greece ? They would still have to convert to drachma anyway.
If they are afraid the banks will run out of money they are themselves hastening it.
Can you explain how fractional reserve banking is harmful to the bank? With loans is it true that the banks effectively increase their assets by 8-9 times by creating a mortgage? If this is true, does this mean if 10% if their asset based is called, i.e mortgage default, the bank would collapse?
Fractional reserve banking is the only way that a modern bank can operate. It is also the only method by which the population of a country can large scale purchase property ,cars etc.
For that reason building societies, who cannot leverage deposits , chose to become banks.
The process does not harm a bank . Unpaid loans for whatever reason will harm the bank.
When this occurs and depositors get wind of these negative developments a run on the bank is likely to occur. The UK government guarantees 85000 pounds to each depositor. If you have say 200000 pounds in a bank then you may decide to join the queue.
If 10% of a bank’s liquid asset base was called over a very short period of time then I suspect that they will survive.10% is not dramatic-in fact it is almost normal on a day to day basis. Money goes out –money comes in
It is when closer to 100% of their liquid asset base is called, then the
problems occur. What has changed? What has caused the panic?
The answers to these questions are somewhat irrelevant . For certain the bank is in trouble. Time to give the bank of England a call.
Note: a mortgage default and a call on the bank by depositors are not the same . The former can cause the latter.
Do central bank losses matter? What are the consequences of writing of its losses and start off with a new balance sheet? Essentially they are buying assets e.g property, shares etc at no cost ( printing money )
Is it better to sell more services/products with less profit, than sell less with high profits?
What are the pros and cons to the employer, worker, and customer?
i.e high revenue low profit, vs low revenue high profit.
Are We going to bridge the gap of poverty by 2030?
Does the bank own the property after the loan is defaulted upon? Where does the money to buy the property come from? e.g from a deposit of 20000, a bank creates a loan of 400000, now if the property is defaulted upon, the bank owns the 400000 property, effectively gains 380000, from 20000 real money. Is this correct? The bank effectively did not ‘pay’ for the property at all.
A bank is just like any other business . It is concerned
with the surplus of income over expenditure over time.
In the example that you state.
The bank has the expenditure of the interest it pays on
the deposit. It also has overheads- the same as any business
The only income is its interest on the loan.
When a default occurs it has no income on the loan –It is
just left with all expenditure.
In relation to this transaction it is losing money .It s large overheads have to be paid.
That continues for the whole time that the empty house is un- sold.
People typically abandon homes when the mortgage is much higher than the current market price.
If this practice were to continue for significant amount of the banks business then it would simply become illiquid.
The bank is in trouble even though it has a book asset of unsold homes.
The benefit to the bank as a consequence of it creating imaginary money ,is also imaginary when loans do not get paid back
When a house increases in market price it is not the value of the property that increases-it is the value of the land that the property sits on. That value is a consequence of the 3 regular factors –Location –Location –Location.
A desirable location can quickly become highly un- desirable if all around comprises boarded up un sold houses.
The circumstance of a house buyer abandoning their home will never occur in a stable market. If the property loses its value it is possibly because the property itself has lost value. The land value could devalue over time. The property is unlikely to be abandoned if benefit goes to the bank.
The loan will typically be repaid or the property will be sold.
The occupier needs somewhere to live.
The circumstance that has recently occurred ,given its nationwide impact, is a consequence of a failure of monetary policy. Nothing else.
A firm finds the following about its costs: AVC = $10, ATC = $15, MC = $12. The firm sells its product in a competitive market for $12/unit. The owner asks you for a recommendation on whether to continue to stay in business. What is your recommendation to the owner? Be sure to give economic justifications for your recommendations
If a firm finds that its marginal cost of production is $30 and its marginal revenue is $25, explain what would be the appropriate response if the firm’s goal is to maximize profits. Use marginal analysis in your answer
In connection with this, what are some examples of perfect elastic demand?
In connection with this, what are some examples of perfect elastic demand? Explain how they are made as examples.
how do currency exchange houses or bureau de change affect the economy of border towns?
Hi. May i ask will money printing lead to inflation?
I’m wondering money printing will only increase general price level once-and-for-all only, it’s won’t lead to inflation, which is defined as sustained increase in general price level.
Am I right?
how do I determine whether a bank is in over or under reserved
how does an oil producing country sell its oil.
say there is a country which produces some 2 million barrels per day. Consumes half million and sells the remaining 1.5 barrels to the international market. How does it go about it – in detail ! Please.
Thank you.
Hello,
Could you explain the role of inflation expectations on affecting the economy, and the Adaptive Expectations hypothesis?
Many thanks.
Hello,
how can I explain the role of technical progress in promoting economic growth in depth?
It increases economics growth in 2 ways.firstly it cuts the average cost of production of a product and secondly, it creates new products for the market.
how do I evaluate it?
Thanks
Hi, is it detrimental if the current account and the capital and financial accounts do not balance each other out?
Thanks
How does GDP/capita and the share of industry in GDP relate to quality of life and wealth distribution? For instance if two countries have the same GDP/capita (PPP adjusted) but in one of the two countries the industry sector accounts for a higher % of GDP what would one expect regarding wealth distribution and standards of life?
Hi Tejvan,
I need to understand the importance of a capital market to an economy and how does a domestic and international capital market functions?
hope to hear from you soon.
What are the market structure for private education institution in SINGAPORE
what are the possible actions that must be done in order for a cheap currency to become equal to one u.s. dollar?
How effective are the government using taxation to regulate the economy? If anyone know the answer please helpppp!!!
tell me more about the theory of production
what is the 50 p tax?
what role do the stock and housing market play in the growth of an economy?
can you help me these two questions please”
1. what role do the stock and housing market play in the growth of an economy?
2. discuss the live cycle of consumption in an economy?
is inflation always harmful to an economy? if not what are the benefits of high inflation rates?
sorry i wat to write an exam but i need answer to some questions like, thoery of customer behavoiur and the theory of cost in economics.
what are the effects of inflation on investments, in the long run and short run respectively? thx. and also, i think different degrees of inflation affect investments differently, right?
Hi, I am sure we should be measuting the effects of government policies on the level of debt. We are promised that all the additional taxation is to pay back debt. Where can I get a simple statement – I see a graph – which we can see how much reduction has been achieved?
thanks
S
Could you give me a simple explanation of these principles of fiscal policy( credibility, flexibility, legitimacy)? Thanks
Good Day
Can you assist me with the multiple choice question
which one of the following statements regarding the monetary transmission mechanism is correct.
1. The monetary transmission mechanism is more effective when initiated by a change in the tax rate
2. The reserve bank does not depend on an effective monetary transmission mechanism when applying contractionary monetary policy.
3. The monetary transmission mechanism illustrates how changes in the monetary sector affect the real sector
4. The smaller the interest elasticity of investment demand and the steeper the AS curve the more effective expansionary monetary policy will be
What is the difference between a liquidity issue and solvency issue? Can either issue solve each other?
E.g if the current crisis is a solvency issue, why can’t it be solved by liquidity, i.e debt being converted into equity by the fed?
Does money printing/QE always lead to inflation and price increases? If the new money is not spent and sits in accounts, how does this lead to inflation? If prices drops and people are not willing to pay increased prices despite having more money, does this lead to inflation?
Is inflation by definition price increase, or is it an increase in all money supply?
What are the sources of economic growth? explain each soruce clearly?
Are People hungry because the world produce not enough food?
Are the causes of economic instability factors of developing nations similar with the developed ones. I believe that they are not and moreso even those of the developing nations differ from each other. In view of this what are the most immediate action plan that my country, Nigeria would adopt to promote economic stability apart from controlling inflation, overcoming unemployment, corruption, boast agriculture, improving energy generation, industrialization, trade, communication, transportation, peace, etc
To my understanding, inflation is normally caused by increased demand for the goods. While it is understood that a good economy has moderate inflation is it right to say that moderate inflation is a possible indicator of a good economy instead of saying that inflation is good (causation) for an economy?
While inflation drives prices up to spur companies to increase production, the occurence of inflation is derived from a strong demand.
I hope you get what I mean and can help me with this, I’m really confused!
What are the differences between complementary demand and derived demand
Are countries obligated to buy back their collateral from the fed/central bank that they have pledged?
At what price and what terms?
what causes slow economic growth?
Is economics ascience or an art
Economics is an art
It is not like natural science because it deals with human behavior
If we had a never ending supply of energy, would we go through boom and bust cycles? If we had a never ending supply of energy, is it possible to boom without the fear of inflation? Is our current economic situation due to the bottleneck of energy production and demand for it thus creating the unwanted effects of inflation? Do you believe the world is in a wait and see situation- waiting for alternative energy before pressing the boom button again?
Yes if we have never ending supply of energy, our 70% economic problems will be solved.
Energy supply is a big cause of inflation.
What do you think: How and Why did the global economic crisis (of 2008) really start?
I am a strong believer in bottlenecks, the bottleneck of 2008 was the rise in oil prices due to the booming economy around the globe. I have a theory that economies could boom for as long as raw materials/energy/the spirit of mankind are at good supply. The moment the supply is short, then demand for the same creates inflation, thus robbing the economy of stability and moral. The levers that govt uses to slow the economy is to quite simply reduce the amount of capital flowing into the markets and that in itself will slow consumption, distribution, manufacturing and then leads to a crises.
What are ways in which a share price is manipulated? What are the characteristics which make manipulation easy/difficult? What determines the success or failure of a manipulation? Is there a scenario where manipulation will always succeed?
In the case of e.g Bank of Ireland, Irish Life where the government owns a majority share with little free float while still listed, what prevents people from manipulating the price?
Since volume and share price can be manipulated, is the market cap of a share an accurate reflection of its value? i.e in cases of shares being pledged for loans, what criteria do lenders measure besides taking into account the price of the share?
What did J.M.Keynes exactly mean by saying “In the long run, we are all dead”?
i was just wondering what could be the role of fiscal policy in the management of an economy controlled by a monetarist government ?
How is it possible for countries with massive debt to have a strong currency, e.g Japan and the US?
What would be the effects of central banks doing QE and buying up all assets, then writing them off?
Essentially, there would not be any ‘cost’ since they are just printing money, but are buying up assets.
I.E do central bank losses matter, other than others perception of it?
Do the US have to depend on others to buy their bonds? Why can’t the FED just buy all the bonds? In this case, is it possible for the bond rates to be low forever? What would the consequences of this be?
Hi
I was just wondering where you got the figures for the national debt as a percentage of GDP for the graph you published on the 24th January. I am currently doing an assignment at uni and the raw data would be very useful if you could direct me to it. Thank you
please what is Edexcel AS and A2?
Edexcel is an exam board based in th uk. AS and A2 are the two levels of A-Level, the UK ‘advanced’ level exam that 17 and 18 year old do…
is important that rating agencis other standard and poor to get ring to country.
Hello,
I would like to known what mean “Q1″ and “Q3″ on the graph call “Unemployment – inflation, Growth UK”, of the page of UK Economy in 1990s.
Q1 = Quarter one. It refers to first three months of the year
Hi, may I know what is meant of economic uncertainty? I will appreciate if someone helps. Thanks
Hi,
I would like to ask why does stimulating the housing market cause a rightward shift in the LRAS and the SRAS?
Hello, I have been wanting to know; is it possible for a nation’s economy to grow significantly without needing any sort of foreign support? If so, then how?
Thank You
What is a completion of a task with the least amount of resources? A.) scarcity B.) efficiency C.) factors of production D.) allocation
Why could an increase in the price of an essential good lead to a higher demand for that good?
Let’s say a company was highly successful to the point where no other company in its industry could compete with it and it eventually rose to be a monopoly without breaking any rules. Would the government eventually break it up or file suit? If so would those act be considered to encourage communism?
I’m a young beginner here, I’m almost embarrassed asking these questions, but I’m stuck. I’m confused about GDP, national debt, and public sector spending. Couid you please help me understand why high debt as a big percentage of GDP is bad, or at what point does it becomes bad? Japan is at something like 194%, and the UK at 500% (counting all debts and liabilities). Both countries are still waking up every day and going about business (I guess). What do those comparisons of debt to GDP actually tell me? Along the same lines, when I read the EU spends 50% of their GDP, what does that actually mean? That half of Europe’s taxes are spent on government projects like welfare and entitlements, like taking money from the left hand pocket and putting money in the right hand pocket? I’m lost. Could you please use credit cards or something else as an example to help me understand the principles involved in these two problems?
first of all i wanna say that its a great site and help me a lot ,
i wanna ask , plz explain free enterprise economy , planned economy , and mixed economy with some diagrams? plz
hi there I just wanted to know what the possible connections between high fiscal deficits and stability are?
Hi Tejvan,
let me start off by saying I’m not an economist. I do not hold a degree either.
I have been a property appraiser for 10 years and have taught myself all (though limited) that I know about economics, both macro and micro. But thanks to
sources like econ help, I’m learning more everyday. I find economics fascinating.
The recent global financial and economic crisis has seemed to be an event only
arguably rivaled by the great depression and Europe’s economic problems in the
19th and 20th centuries.Yes? No? Trying to get a handle on all the fluctuations
and cycles have proven to be a massive challenge for me in the scope of my job.
I am trying to understand more about two specific measures or ‘triggers’ of inflation.
One being, money supply and the other, the demand for money.
Conventional wisdom say’s a rise in interest rates, decrease the demand for money.
But with interest rates at record low’s, the ‘demand’ for money hasn’t seemed to wane.
Has it? Investors are still purchasing, consumers are still spending, albeit at lower levels.
But with some durable’s actually ‘deflating’ the volume of sales appears steady.
Services are still being rendered is what I am saying.
Also, an increase in Money Supply, tends to raise prices, yes?
Yet, only some commodities (food & fuel) have seemed to increase while other
commodities and assets have decreased in price.
(Ruling out the actual -/+supplies of said commodities and assets)
I do see the relation of the demand for labor vs the demand for money, that I get.
BUT, output’s have not decreased very much with regard to labor forces.
Many companies and nation’s are maintaining their outputs with reduced labor forces.
There just seems to be many paradoxical actions taking place in markets and economies.
So, to sum up my questions if we have;
an increase in monetary supply, (as we do)
Interest rates low and falling,
certain commodities rising in price,
certain commodities falling in price
a steady production of goods and
a relatively steady velocity of money,
high unemployment with decreased labor forces…
What does it all mean? : p
I thank you in advance if you can shed some light for me Tejvan!
question:when and why did mr. ricky perry leave the repulican party to the conservative party?
hello!i want to know how a retail price index is constructed?can you explain this please?Thank you…
four member household uses 345 gallons of water daily.235 for inside and 110for out sideside.would doubling or quadrupling water rates work hardship on poor people?
How much extra on a bank holiday should a paperboy get?
hi
can you tell me how you can see if their is allocative effiency in a supply and demand diagram/
Hello ! I have question. Can we consider foregn aid as a key economic challenge for a country?
Marie
Foreign aid is very helpful for some countries who do not have enough resources to fuel their economies. Foreign aid not a big challenge for any country as I know. Many countries give aid for military purpose and some for pure economic help. Practically many countries give Foreign aid for their personal aims. US gives foreign aid to Pakistan but if govt does not use it efficiently it would be wastage. Foreign aid is also sometime harmful when it is given to bad
ruling states and this increase strength of these bad elements.
concept of elasticity can you draw while fixing the
price for this new drink? [10 marks]
Elasticity is very important in fixing price of a new drink. Price is being fixed by taking elasticity of demand for maximizing profit.
Hi,
I have a question: what are the pros and cons of setting and enforcing a living wage in the uk?
George
Living Wage is set by govt according to compulsory needs of common person without any extra income . Govt fixes wage by keeping in mind how much money is needed for housing , food, cloth, necessary utilities etc.
Hello,
I was wondering, what are some of the policies and possibilities a country can use to increase the value of their currency? Specifically countries who would be trying to “overthrow” the US dollar like China, India, Brazil, Russia etc.
Thank you
Duke
Exchange rate of currency mainly is determined by demand and supply of particular currency. There are many natural factors that make effect on supply and demand and there are may unnatural factors like central banks or state ‘s interference in supply or demand.
In general countries like India, China etc do not have strong currency like US and these countries are not trying to overthrow US currency. Practically Chinese government tries to maintain low exchange rate of its currency against US dollar.
why are economists concerned with the study of theory underlying the firm?
Firm is an economic entity . So it is part of economic study.
Many aspects of economics are concerned with firms .
Firms play important role in economy and there is wide theory related to firm in economics.
Instead of massive bailouts in the U.S. to mitigate the subprime crisis why could ARM’s not be renegotiated/converted to alleviate defaults? In other words, why does ‘too big to fail’ mean big banks can’t at least absorb some of the subprime fallout? ie fail partly, reorganize, etc. Isn’t there a moral hazard problem with simply bailing out institutions that make bad financial decisions?
David
Bail outs are being given for saving national economy. Main purpose of giving bail outs to big institutions is not just to save them but to decrease bad effects on economy due to their failure. Yes there is moral hazard problem. Govt wastes tax payers money to help those who are responsible for all this.
Practically although sometime bailout is necessary but there should not be any benefit for business houses. In general all what did happen in America, could be changed if Banks show transparency. Banks do not show real picture until situation become to bad to hide.
All does not happen in one day. It is a long procedure and regulatory institutions and rating agencies ignore it.
It is morally wrong to save companies who are responsible for their bad conditions. This also gives wrong message to them and creates problem of moral hazard.
Hi,
I would like to ask whether the budget cutting in most European countries encourages consumption of domestic goods and reduces the demand for imports from China for example?
Individual country deficit may decries but overall European deficit may not decrease due to packaged given by European Bank. Overall exchange for Euro may remain low. This will increase cost of import and decrease demand of Chinese products at limited level.
Budget cut by individual countries may decrease demand , but it will decrease overall demand not matter Chinese product or European products. If Chinese products remains lower cost than naturally people would not left them buying. Overall demand will be decreased. Actually depreciation of Euro against Chinese yen will make effect on sale of Chinese products. Although other things like better technology , fashion , trend etc will also play an important role in future.
Looking at the deficit/debt problem in the US, I wonder why it is necessary for the federal government to borrow all of the money it needs through the fed via bond sales?
A simplistic example I was thinking about – Let’s say that the total amount of currency in the economy is $1. Someone uses this $1 purchasing materials, and creates goods worth $2 for resale. Since there is only $1 worth of currency in the economy, it’s basically created deflation since money is worth twice as much now
Assuming we wanted the relative value of money to stay the same, we’d need an additional $1 in currency available. In this case, the government could create $1 without borrowing, based on the amount of goods created. But the way I understand it is that the government borrows $1 via the bond market instead. Why borrow instead of simply create?
In the real world, given the amount of goods created within the country it seems like the government could pay off quite a bit of the debt by creating money (Ie: Printing & paying with this) without worrying about impacting inflation.
Thank you for your reply. I read a report produced by the Congressional Research Service titled ‘China’s Holdings of U.S. Securities: Implications for the U.S. Economy’ and it stated that one of the reasons why China favour US securities is because ‘in order to maintain the exchange rate effects that lay behind the acquisition of US dollars, those dollars must be invested in dollar denominated securities’. I was wondering if you could possibly explain what this means. If you would like to read the report, the website is http://www.fas.org/sgp/crs/row/RL34314.pdf. The statement is on the seventh page. Thank you!
Hello Henry
I just watched 7th page. I think he wrote this because if China buys securities payable in any other currency there are two effects- China has huge dollar reserves in hand. For buying other currency securities China has to convert $Dollar into other currencies like Euro etc. This will increase dollar supply , thus it will decrease exchange rate of dollar which China do not want. His other meaning may be – if China buys these securities this can make dollar more stable because if demand of dollar denominated securities decreases this will make bad effect on dollar and deficit may increase . This will also deprecate value of dollar.
Hi. I would like to ask whether China’s holdings of US bonds is a strategy to manipulate China’s currency or is it nothing more than just a safe investment from China? If China’s investments in the US treasuries is for the purpose of devaluing their own currency, could you please explain to me in simple term how this works?
It is not any political strategy as it is more related to finance matter . It is just due to investment. Personal thinking of Chinese leaders may also be a reason . This does not has any major relation with devaluation of Yuan although it may have very little effect on value of Yuan. It is a debt investment by China as China has huge surplus money. Investment is very big and large economy of US is suitable for such a huge amount. Most of international trade is made in US Dollar.
Hi Professor,
I have one simple question about tariff and FX reserves. For example, why is China holding massive of USD as FX reserves. I believe is due to China’s trade surplus, therefore China has loads and loads of USD/T-bond on hands. But I don’t understand how it works out? Please kindly to answer my concern, Thank-you!
sincerely,
Keith.
Yes China has huge foreign exchange reserves , most in the world. This is due to China ‘s huge export. Dollar is a major currency in world business possibly US Dollar may be biggest portion of Chinese reserves.
It is like China has given loans to US in US currency. China may not like to hold huge reserves of $dollar. Due to huge amount it is not easy for China to convert these dollars into other assets. Although China is continually doing work on this.
Hi,
I was wondering if anyone could help me with how Quantitative easing can possibly reduce a budget deficit? and what are the downsides of quantitative easing?
Thank you.
Main purpose of Quantitative Easing is not decreasing budget deficit, but to stimulate the economy. When economy is slow , govt may pump money in economy to encourage economic activities. It may help economy for getting growth. By this growth may increase tax collection and thus decreasing budget deficit of Government. Although practically it increases deficit of government in short run. It is not used in normal economic conditions and not in long run. Supply of more money can up inflation rate. This will also decrease value of currency.
How can tax cuts stimulate the economy when government has to borrow the money?
It seems to me that with a tax cut, the government is adding money to the economy but is also removing money from the economy by borrowing to finance the tax cut. So where is the stimulus?
Thank you.
Govt can stimulate the economy by cutting taxes although practically it is only used in recession. It is not necessary for government to fund all tax cuts from taking loans. It also can make paper or electronic money without any liability.
All this is matter or demand. As you know , there is no natural value in economics. It is our needs which make any thing valuable and it is economic cycle which keeps creating money and jobs.
Major reason of slowdown is decreasing demand . As you whole economy is based on demand and demand is also based on income and vice verca. This is economic cycle.
By cutting taxes , govt leaves extra money for tax payers. By cutting income tax rates, tax payers may have more money. They will spend more. This spending will create more demand. This more demand will create more jobs and will make business more profitable. By cutting sale taxes etc it will make cost of products less for customers. Due to less cost, they will consume more and govt also can increase margins of companies.
So in recession governments try to increase aggregate demands by different approaches. Tax Cuts are common used by governments for this purpose.
If you are singer, your success will depend on demand of your songs. If you are shopkeeper, you can make money only if there people buy from your shop. If you are a pilot , you will get job only if Air Company need your skills i.e. it demands your skills.
I am doing a report in english class about why people would want to change the driving age. And I was hoping ya’ll could help.
Hi,
The Bank of England uses fan charts to show their inflation forecasts. Would you be able to explain how they decide on the uncertainty, the risk (or the balance of risks assigned to each prediction), and the probability for the different rates of inflation they show on the fan charts? Is it mechanical or more analytical and based on instincts?
Thanks
Bank of England uses fan chart to forecast inflation rate. The Fan Chart is basically used to improve presentation: to focus attention on the whole of the forecast distribution, rather than on small changes to the central projection. Bank of England also gives measure of risk related to uncertainty by taking previsions experience. It assume a central value means which has most probability according to it.
Hi there..i am having some slight trouble with an assignement ( i am first year economics student). I have picked the essay question of ‘Discuss whether the Uk government could do more to reduce youth unemployment’. I wsa wondering how I should go about constructing this essay. In the fist half of my essay, should I be talking about the benefits of reducing youth unemployment/cost of not doing so.. of course in conjunction with using examples of current policies that the government are using that are not effective and so may need adapt newer efficient policies. Thank you for your time
You should discuss the decision of government that could decrease unemployment in youth.
How does the paper transactions e.g CDS, Futures, affect the real value of commodity price? What is the ratio of current value of paper trades vs actual delivery of transactions.? Is it correct to say the current prices of commodities do not reflect actual demand, since many contracts placed are futures?
Can the number of future contracts placed on a commodity affect its current price?
For example, if suddenly huge amount of 1 year futures are placed for oil at USD10, will the current price of oil plunge?
Yes commodity trading leaves effect on prices of commodity. But it purely does not fix rates as major pricing phenomena depends on fundamental demand of commodity.
How come a company can still trade even after declaring bankruptcy e.g AMR? Why is there still residual value in the share price? Is there a difference between trading and share price in a Chapter 11, vs Chapter 7 bankruptcy?
In the current environment of deleveraging, how does printing endless amount contribute to inflation?
Basically debt is just being converted into equity, so in effect the ‘value’ remains the same.
If the Fed buys up assets e.g shares, property etc other than bonds, then no new debt is being created, is that correct?
In this case this would not be inflationary.
The only reason why central banks should not print money is purely morality, and nothing else.
Printing more paper money in general increases inflation. As you said, if Fed buys assets by printing paper money, this will also create inflation. Inflation means decreasing purchasing power of paper money. Yes will help to increase value of assets at some level. Yes purchasing money for buying assets than just for funding great deficit generally creates less problems as assets are limited in nature. You gave argument about value. You should think why govt need to buy? Because there is no buyer in market to buy that property or share at same rate . So govt naturally buy at more than market value. It give more money for property or shares i.e market value of property is less but govt pays more paper money than the market value of shares.
In general this action will inflate money and deflate property up to some level.
What happens to short selling when shares are suspended/company files for bankruptcy?
In naked shortselling, do you have to deliver the contract? How do you buy back the shares when it is suspended/delisted? Do you deliver the contract when suspension is lifted or when the contract is due?
In regular shortselling what happens to trades when the company is suspended/files for bankruptcy? How do you determine the buying price of shares you need to cover for the shortselling?
what are the arguments against free trade? and possible reasons why the Doha round failed.?
Human Resource development and economic conditions in different parts of world are not similar. So free trade is possible between them. Some country will get advantage and some have to face problems with it. Main idea behind free trade is to make world economy more competitive and productive. An agreement on free trade will make different effect on America, Europe and on Asian countries . So all have different demands regarding their requirements. They are agree on many things but most of them are not agree on agriculture issue.
if the lender of last resort calms gilts investors, keeps the yields low and helps government borrow cheaply and finance its deficit cheerfully, why is printing money bad news as it sends gilts upwards and generates inflation. in essence lender of last resort = money printing press, so how are these reconciliated?
Hello dan
Government borrowing rate depends on financial position of government. If government has less deficit , repay its loans easily , this will keep yields low.
If deficit is high and government is unable to fund it from taking loans or from taxes and decide to print money to fund it , then it will keep yield high. Simply printing money will also inflate currency . Due to this borrowing rate will also increase due to general high interests.
Financial position of Greece and Italy is very bad. Both countries have big deficit. Governments have already taken big loans. Both countries feel difficult to repay its borrowing. Due to this, market feel risk to give them fund. Due to more risk, yields increased naturally.
I remember a time when people saved money to buy goods and property. Credit (even to buy houses) was not available to the general public. And people could afford everything.
Is seems to me Bank Leverage is a short term solution to improve production and development, but it has disastrous effects in the long run. In a very basic line of tough, it looks like everybody is eating the crops before the harvesting.
In you opinion, to what extent bank leverage is good to the economy?
Is it worth it to have this current levels of leverage?
Thanks a lot!
Bank leverage is a need of modern economy. But excess of everything is bad.
There should be strict rules related to credit which banks should follow.
When time is good banks forget risk factor. They just try to give more and more loans and increase their business. Loan may be taken for different purpose. Most dangerous purpose is to take loan for investing in Real Estate . Due to downturn in property prices borrowers become unable to return money. Banks must follow a common standard regarding their credit policy .
Hi, I know you have previously answered the following question however I cant seem to find the guideline on this website. I was wondering if you can help?
Discuss the proposition that the UK’s over reliance on deregulated banking industry is the key factor in the current economic downturn.
Regards
Fahad
Hello FAHAD
Deregulation or soft laws regarding banking companies is one reason of this financial crisis although many other factors are also responsible for recession. Due to soft laws regarding Banks , many banks gave big amounts of loans to unreliable customers. Mortgage lenders borrowed hugely and lent it to customers without any hesitation . They borrowed as much they can and lent as they can without any fear. Major Banks moved in sub prime mortgage business . This wiped out capital from banks. Govt ignored growing unsecured loans. There were not effective restrictions regarding large exposures. Bank of England did not set Minimum Reserve requirements effectively. Cash Reserve Ration in England remained very less on sometime even less than 3% . This is more than 15% in HONGKONG and even more than 20 % in China. Banks of both countries are very less effected from financial problems. In simple words, Govt can easily save banks with proper control although they did not grow very fast but their position could be more stable.
Hello Mr. Raj,
Thanks for the comments.
Yes, Euro plays an important role to make EU economy wider. Having said this, we have noticed that since Euro became a single currency, few countries became uncompetitive and more unstable. Excessive borrowing to meet its daily expenses and ever-increasing costs with a jobless growth created this situation.
Exchange rate of a country plays a vital balancing role for sustainable GDP growth with jobs to its people. For example, cost of making shoes is not similar in every county of EU. It depends upon productivity of labors plus other costs of each country. If the exchange rate is similar to every county, whichever will be able to produce shoes at a cheaper rate will produce and sell more shoes compared to others. It means GDP growth of those countries will grow much faster than those countries whose productivity is lower and costs are higher. In this situation, the exchange rate plays a vital role. With devaluation, those countries can also sell their shoes at the same price. In the long run, exchange rate will help to maintain a balance.
Exit of Greece and few other countries from EU will help to end the uncertainty in the market with few hiccups. It will also help to regain confidence in Euro for a medium to a longer term.
Please comment.
You are absolutely right. If a country has more productivity and less cost and other country has more cost of production. For example assume , in Germany cost of production is less than Greece. There is big difference. Germany can easily sell its goods in Greece but Greece is not able to sell its goods in Germany and after long period of time ,this leaves a big gap between Greece-German trade balance . This will start depreciation of Greece currency. This will increase value of German Mark compare to Greece currency. With the depreciation of Greece currency , cost of production in Greece will decrease. This effect will help to re -balance trade between German and Greece and help Greece economy to become competitive against German economy.
But practically, many times this does not happen because governments directly or indirectly interfere in fixation the value of their country‘s currency.
Big problem of adopting Euro is that individual country cannot print money as it wish to fulfill its financial requirements ,it has to take loan. There are restrictions. If Italy has its own currency, then problem could be smaller than now. Italian govt could issue as much money as it needed. As result there could be more inflation but Govt’ s position of debt would be better. This is difference between USA and Greece. Position of USA was never better than Greece.
However, we can’t blame Euro for all problems . Even in countries with single currency like USA, England ,Japan are also facing problems of recession . Bad policies of governments are also responsible for this situation.
Thanks
Hi,
I don’t know if you’re familiar with this area, but I just wanted to get your opinion/knowledge on whether you think Branchless banking / mobile financial services can have a major impact on the development of low income economies in the future? We are clearly reaching the end of a post war keynesian deficit spending paradigm and it seems the capitalist solution to the economic problem of scarcity is failing.. Could mobile finance be a new policy tool/approach to fight poverty and increase financial inclusion?
Building on the idea of the big/great society and community based policy instead of the capitalist policies which have kept the 3rd world in poverty for all these years.
Thanks
I don’t think there is major relationship between development and Branchless banking / mobile financial services of low income economies in the future. Capitalist policies are not fully responsible for bad economic conditions of 3rd world. Actually political corruption and low developed human resources are main reason for poverty in these countries. Yes there are some problems in capitalist policies but you can’t blame them for all the problems.
Every country’s economy has their own dynamics. Competitiveness is more or less adjusted by appreciation and depreciation of individual currencies in free economies. Then why EU pressurizing Greece to stay in Erozone? Except borrowings at a cheap interest rate, what are other real advantages of Euro?
EU is pressurizing Greece to stay in Euro zone because if Greece leaves, many other countries who have same problems may also leave Euro. This is very bad for the future of Euro. Like any other thing, some countries such as Germany, France etc have more benefits of Euro and some have very less benefits .
Main advantage of common currency is that it increases spectrum of currency. Currency is more reliable because underlying economy is wide. For example , most countries would like to save reserves in US Dollar or Canadian dollar than Hong Kong dollar. Secondly common currency would increase business activities between European countries. European economy would be more united and this would also increase competition and efficiency. Euro is also a symbol of European goodwill . Before Euro US dollar was most respected currency of world and German Mark, French etc were not as respected currencies as US Dollar.
Dear Mr. Raj,
Thanks for your reply.
In my opinion, why EU countries like France and Germany in pressurizing Greece is because of bond and interest rate at which they are borrowing. In case of exit of Greece from Euro zone, there will be instability. Bond’s interest rate might increase and will go well over 7% due to lose in confidante in Euro. That might also make countries like France very difficult to sell their bonds. They will have to face this situation for the future of Euro. I don’t know the political issue here but due to Euro, many countries are happened to be uncompetitive. With exit from euro zone, countries like Greece might face devaluation and unemployment for a certain period but continuing like this will need them another bailout in near future. Euro with few ups and downs will survive even after exit of Greece.
Please comment.
Manish
Hello Mr Manish
Yes , interest rates may be reason but I think it is not very important issue specially in long run. German and French economies are very big. Germany has just 1.90% bond rate for 10years which is less than US and UK which have more than 2% yield . Although if Greece leaves Euro ,this will make pressure on borrowing rates of European countries due to instability of Euro and lack of confidence . Main reason behind Euro was not cheap borrowing. It was politically and economically motivated. Economically, main motives were-making economy wider, more stable and more competitive.
It is not only matte of Greece. If Greece leaves, door will be opened for many other countries like Spain, Ireland , Italy, Portugal etc.
Actually in long run growth does not depend too much on currency of country. If Greece did not join common currency, most possibly situation would be different. Economy automatically depreciates its currency as a reaction. And problem does not grow too much.
It is very difficult for Greece to remain in European Union and It is also not very easy to give bailout fund to Greece and Italy. This will make burden on German and French economies. Yes Euro can easily survive without Greece as Greek economy is very small and leaving of Greece would not leave big effect on European countries if other members remain in union.
The argument in Europe at the moment is whether the ECB should be able to buy bonds (new? old?) directly from governments as well as being able to buy old ones on the open market (“secondary market”?). Is it correct that in either case that the ECB would just the create Euros to buy the bonds? I am confused about when the central banks create money and when they use other reserves.
I can already hear you asking me “Well where else would they get the money from?”, but talk of borrowing from China, and all the fuss over quantitative easing has left me just a bit confused.
With thanks,
Rod
ECB can help European countries by buying bonds issues by those countries. This is a financial help to countries which are suffered from financial problems. This is a type of loan to European countries that need money. They can also get money from outside Europe such as China or Japan.
What are the pros and cons of the fuel subsidy in Nigeria?
Main advantage of Fuel Subsidy is that peoples can get fuel at low rates. This helps poor people. Secondly it can also help in increasing economic growth in some time.
Financial burden on state is big problem . Secondly due to fuel availability on subsided rates , there would be more consumption and wastage of fuel. Any thing which is available at high rate , naturally we use it efficiently and there would be less wastage. Subsidy on fuel also decreases competition in local market specially with other renewable energy sources such as solar cooker .
I have a problem with my assignment. So we have a machine that can be purchased for 15000$ there is no salvage value… it can operate for 5 years. It will cost 150 per day to operate, and it will raise 450 $ per day of operation. The MARR is 10%.
we need to know the number of operating days that is needed to B/c be 1….
Please can you explain to me the main advantages and disadvantages for borrowers and lenders in secondary markets?
Secondary markets play an important role in modern economy . They increase liquidity and capacity. As capacity is increased naturally this may create more risk.
Fannie Mae and Freddie Mac were big player of secondary markets. They increased credit market in US. Secondary market increases the capacity and decreases the risk of primary markets . Fannie Mae and Freddie Mac bought huge loan from mortgage banks.
What are the main effects of the strength of the pound on starting a business?
If exchange rate of pound increases than it will make pressure on firms and companies who export output in other countries. In case , companies who import and sell in UK can get advantage. In case if business uses resources from inside the country and also sells inside the country would have very less effect.
In general case due to high exchange rate, cost of production in Britain would increase comparable to other countries .
what is “Irrational Exuberance”? Kindly give examples.
Habib
I think Irrational exuberance means when something is good only we think it is good but not rationally . For example when there is property bubble & it is highly overvalued than we can call it Irrational Exuberance because exuberance is due to our irrational thinking not due to proper fundamentals.
Hi,
The number of Rhinos that are killed every year for their horns is increasing. They may soon be extinct. What would an economist do about this?
Thanks
Tom
It is more related to animal lover and legality than economists.
In general we govt should make strong laws for surviving these animals.
Govt should ban products which are made from its body.
In general these products are being sent to rich countries like UK, France,USA etc from poor countries like South Africa, Kenya etc. So govts of western countries should also be involved to save Rhinos.
How and why are Market Failure + the 18th Century Commons related?
You can say it because 18th century saw development of modern economy. In past economy was more basic. In USA these situations occurred in many times.These was big depression in American economy. In Denmark there was bankruptcy.
It is because finance and industrial development started in 18th century .
economic policies which could be used to avoide dip recession e.g deregulated,economic policy,double dip recession, fiscal policy and monetary policy.
Yes with proper knowledge we can avoid recessions up to certain level but at some level it is natural economic activity and is good for a healthy economy.
Debt is an economic tool with good and/or results. Explain.
Does real GDP change if the actual number of goods and services remains the same but the price level for these items increases by 5%?
no, that is just a nominal increase in GDP. Real GDP requires an increase in value of goods and services
what exactly are the solutions to the EU crisis?
its my pleasure to ask you how economics affect our lives?is there need to establish good economic?why?
Will there be opportunities for arbitrage if a currency e.g USD to HKD is pegged to each other, since there are bound to be massive imbalances in certain investments?
What will stop these opportunities to occur, or do they already exist?
Is the US really a giant ponzi scheme? Why do they need more borrowers in order to keep the money flowing? Can a ponzi scheme continue if the big players e.g banks and Fed artificially lend and borrow among themselves e.g in shares, investments that have unlimited supply/demand, keeping the scheme going, without the need for consumers borrowing?
how government does the price controls in unregulated markets?
What is economic analysis? Can you give some examples? Kindly refer me to an easy to read book on economic analysis.
Rgds
Jessen
falles in the value of shares at stock marekt-
implication on companies operation and on net worth, how it is create problem for company?
Falls in value of share creates problem for companies in many ways. It decreases their net worth . It makes difficult for them to get fund from market. They may have to pay more interest on loan. Due to low worth they will get less amount through right issue.
Can good news to a rice farmer be bad news for him.
Yes it is normal not just to rice farmer but for everyone in life but only in special conditions. A good production will can make him happy but if due to overproduction of rice his product may be priced at low cost.
Why are the US/UK/Japanese government issuing interest bearing treasuries while these countries can create “free” money on a computer?
And related: why are national European Central banks obliged to issue treasuries [i.e. borrow on the capital market] before the European Central Banks will credit their accounts?
I mean when a National Central Bank sells a treasury, they got the cash they wanted, right? Why then do they need to get their accounts credited by the ECB?
I’m obviously missing something quite simple here. Hope my stupity doesn’t offend anybody here.
Cheers and keep up the good work.
Economics are too important to leave to politicians!
Hi can you give me details of milton friedmans
life and how the time was like when he was alive back in the 1920s-2000 (what was going on and how did it affect him?)
I also need help in understand these theories Milton made:
1) Ideas about Laissez- faire capitalism
2) monetarism & the importance of money supply
and any other fascinating theories he has contributed in economics.
Thanks and if you can give me any useful websites that give these information would also be helpful too thanks again!
Between markets and concerted central banks intervention, e.g in currency and shares, which forces are likely to prevail?
Since central banks have unlimited supply of capital at no cost to them, are they more likely to prevail? Can a central bank fail to control inflation, since they can withdraw money supply easily from the circulation?
If debt write downs and decline in asset prices e.g shares, bonds, property are replaced/supported by capital e.g QE to buy the assets, does this lead to inflation, deflation or neither?
What is the relation between the price stability, preservation of value, and liquidity of an asset such as currency, gold and property? Does an asset which is stable in value have to be liquid etc? Can an asset that preserves value fluctuate in price a lot, or be illiquid?
Since current price movements of gold fluctuates more than shares index and currency, does this mean gold is not a good store of value?
Why Apple choose to show iphone 4s at such a key moment so that investors are disppointed?
An example of a natural monopoly would be:
A.a supermarket
b.An electric company.
c.A cellular phone service provider.
d.A building supply store.
How does an index fund work? What happens during a reweighing, e.g if a component company goes bankrupt and another company replaces it in the index? Does this give a distorted view of returns of indices? In this case does this means an index fund have to inject in new money for the reweighing in order to continue to track the market?
What happens if a country/company converts its debt to equity, i.e if creditors decide to convert their lending to shares in a company/country, if it cannot pay? Does this change the value of a company/country, and makes it more valuable, or does the dilution reduces its value?
If more than 90% of daily trade of currencies is due to speculation, does this mean that currencies are not a stable source of value, and that its demand is not ‘actual demand’ , and that prices may collapse suddenly, if the speculators suddenly cease trading?
Does this mean currency values can drop by 90% in a day?
When a country face a recession.can they just increase the import taxes?so the country local production is increase to meet the demand and improve the employment as well as the economy?
What happens to money when the prices of shares collapse? Do they just disappear? Is the sharemarket a zero sum game, if we assume that the amount of money put in is constant, and excluding fees i.e meaning for every person who gains, someone lost. What happens if the share price of a company trends upwards over the long term? Does anyone lose?
If a share price drops 50%, you will need a 100% gain go get back to the original amount. Does this mean its easier to lose than gain in the share market?
If we start with 100 dollar value, and the portfolio gains 10%, it becomes 110, and then if it lost 10%, the value becomes 99. Where did the 1 dollar went?
down the demand curve, what do different points tell about consumer welfare, MRS and marginal benefit associated with various levels of consumptions? explain with the help of indifference curve and budget line. plz reply soon
if britain’s economy gets hurt how will americans be affected?
Aren’t the fed essentially doing their job of supporting the financial system? Then why are they being criticized for doing their job?
could you please explain these questions to me i wasn’t in, when the homework was set so i dont really get it. Thanks
)
1. Whatdo you think is the major differences between the Cuban and UK economies?
2. What do you think are the major differences between Cuban and UK political systems?
If all money is loaned into existance either by central banks or the fractional reserve system, then total debt in the system must always equal the total money supply.
In this case, how will there eer by enough money in the system to pay the original interest, or does this rely on an ever expanding money supply
The only way where total debt equal total money supply without increasing money supply would be a debt write-down or default some time down the road. Is this correct?
1. After learning the basic estimation techniques, which of the following regression models will you choose to explore how population and income determine the demand on pizza and estimate the “constant” income elasticity of demand on pizza? Please brief explain your choice.
• Simple linear model
• Multiple linear model
• Quadratic model
• Log-linear model
2. In theory, “Giffen good” is a good for which the demand curve is upward-sloping, which violates the law of demand. Please provide at least one example as a Giffen good and explain briefly why the demand curve is upward-sloping.
list the reason which make the indian agriculture ecnomy backward suggest some measurs to recive it
what are the components of the balance of pyement account, and how do you construct it
The school fees that students pay in universities has increased substantially.However,the student population in universities has also increased.Does this phenomenon violate the law of demand? please relate it to economics only
suppose you are marketing head .your campany is planning to float new drink which is blue in colour.
what lesson from the concept elasticity you learn while fixing the price of new drink?
All Equilibrium all involved variables must balances what are the economic implication of this statement discuss
Which of the following events would cause a movement along the demand curve or supply for Indian-Produced clothing, and which would cause a shift in the demand curve and supply?
i. The removal of Quotas on the importation of foreign clothes.
ii. A cut in the industry’s costs of producing domestic clothes that is passed on the market in the form of lower prices.
Small businesses are touted as the creators of job growth and it’s often commented that big companies don’t create net new jobs. Here’s my question: is this also true when you examine trough-to-peak job growth coming out of a recession? My hypothesis is that job growth for big companies is limited “through the cycle” but might be quite significant as a source of job growth coming out of a recession. Is this right?
Identify and discuss five classification of goods demanded
What is a free market economy and what are its advantages and dis-advantages ?
Thanks
Throw some light on Asia & its’ Development.
How about the Gems – China & India
Will they be impacted of the global slow down…
Request an article from you on the forecase
When there is difficit in purchases what happens to demand?????
hi, my question
what are the main problems that economics seeks to address ? How successful do you think economic theory is addressing these problems.
choose two industries in your country
identifying which is labelled and structured they pertain to and state three advantages and three disadvantages of each
How did capital inflows in the nineties and two thousands act as a catalyst for the distortion of housing prices which resulted in the real estate bubble?
I Am a Beigineer of Economics in M.B.A.how to prepare my materials to understand
hi,
what was actually happened in grameen bank?what was the scandal happening?
how muhammad yunus did this?
The US has a national debt of $14trillion. How much of the rest of the world’s debt does the US hold? If the US called in all it’s loans to the UK, Mexico, etc, could it pay off it’s debt?
I am a bit perplexed by some data that I have been looking at from the DoT’s website. I have been debating with a friend about our national debt and he posted a graph that shows our(US) outstanding debt having risen at a fairly constant rate since the Great Depression. Even though debt/GDP graphs show us as having payed down much debt from the period 1946-1970, my friend’s graph is not incorrect because I cross referenced the data with the DoT’s Outstanding Debt Charts and our outstanding debt has indeed risen since 1932. I do understand that making interest only payments while GDP continues to grow will create the illusion that we are paying our debt down on debt/GDP charts. The strangest thing that I find about the data is that in the ten years leading up to the Great Depression we were diligently paying down our debt, giving merit to his claim that we cannot pay our debt down without our monetary base shrinking and causing a recession/depression. I really want to tell this guy that he has bought into conspiracy theories but in light of this information I am hesitant to do that. Am I missing something here?
Hey, i just would like u to roughly outline the methods for sucessful and complex analysis and evaluation of the basic economic problem through news articles. how do i link financial problems liek national debt…etc to the basic economic prblem and scarcity of human resources?
Thankyou in advance,
‘why is the size of the uk government debt so important’
Q1. The table below shows the hypothetical production of cloth and rice by Nigeria and Benin republic.
Countries labour rice cloth
Nigeria 100 25 20
Benin republic 100 10 15
(a) Determine the opportunity cost of producing cloth and rice in Nigeria and Benin republic.
(b) Which of the two commodities does Nigeria and Benin republic have greater comparative advantage over reach other and why?
(c) Which of the two countries have absolute advantage in the production of cloth and rice?
Q2. In year X, 25 naira exchanged for a dollar and later in year Y, 75 naira exchanged for a dollar through the forces of demand and supply.
(a) State the effect of the above on the value of the dollar.
(b) How much, in naira, would be needed to purchase a 25,000 dollar worth of car from the united states of America in year X?
(c) How much, in naira, would be needed for the same purpose in year Y?
(d) (i) Calculate the percentage change in the value of the naira between year X and year Y. (ii) From your calculations, state the effect on the value of the naira.
Q3 The table below shows the trade position of country X and Y in year 2000 and 2003.
Country Year export prices import prices
X 2000 1496m 1698m
Y 2003 1520m 1306m
(a) use the table to calculate the terms of trade for country X and Y. (b) state the condition of terms of trade for the two countries. (c) Give a clear definition of terms of trade. (d) Mention three ways of improving terms of trade.
1) Suppose at the world price of $12. 10,500 units were produced domestically, and 16,700 units were consumed. When a quota was imposed, it caused the domestic price to rise to $15, domestic production increased to 12,000 units, and domestic consumption decreased to 14,500 units. Calculate the implicit tariff equivalent of quota.
a. 25%
b. 20%
c. 225%
d. 180%
2) Suppose at the world price of $12. 10,500 units were produced domestically, and 16,700 units were consumed. When a quota was imposed, it caused the domestic price to rise to $15, domestic production increased to 12,000 units, and domestic consumption decreased to 14,500 units. Calculate the quota rent.
a. 7,500
b. 37,500
c. 74,400
d. 18,600
3) Suppose at the world price of $12. 10,500 units were produced domestically, and 16,700 units were consumed. When a quota was imposed, it caused the domestic price to rise to $15, domestic production increased to 12,000 units, and domestic consumption decreased to 14,500 units. Calculate the quantity of imports before and after quota
a. 27200 ; 26500
b. 6,200 ; 2,500
c. 74,400 ; 37500
d. 326,400 ; 397,500
4) Suppose at the world price of $12. 10,500 units were produced domestically, and 16,700 units were consumed. When a quota was imposed, it caused the domestic price to rise to $15, domestic production increased to 12,000 units, and domestic consumption decreased to 14,500 units. Calculate the value of imports before and after quota
a. 27200 ; 26500
b. 6,200 ; 2,500
c. 74,400 ; 37500
d. 326,400 ; 397,500
5) Suppose at the world price of $12. 10,500 units were produced domestically, and 16,700 units were consumed. When a quota was imposed, it caused the domestic price to rise to $15, domestic production increased to 12,000 units, and domestic consumption decreased to 14,500 units. Calculate the value of domestic supply before and after quota
a. 10,500 ; 12;000
b. 126,000 ; 180,000
c. 200,400 ; 217,500
d. 16,700 ; 14;500
6) Suppose at the world price of $12. 10,500 units were produced domestically, and 16,700 units were consumed. When a quota was imposed, it caused the domestic price to rise to $15, domestic production increased to 12,000 units, and domestic consumption decreased to 14,500 units. Calculate the value of domestic demand before and after quota
a. 10,500 ; 12;000
b. 126,000 ; 180,000
c. 200,400 ; 217,500
d. 16,700 ; 14;500
7)One of the main motives encouraging the formation of regional blocs is:
a. Producer’s anticipation of trade diversion benefits
b. smaller markets facilitate economies of scale
c. Reduce the dependence of less developed countries on each others
d. None of the above
8) Suppose that there is a 20% import duty on pocket calculators, but no import duty on the components used in their manufacture. If domestic calculator manufacturers use 70% imported parts, then the effective protective rate of the tariff is
a. 66.7%
b. 150%
c. 28.6%
d. 20%
9) Assume that the United States imports automobiles from South Korea at a price of $20,000 per vehicle and that these vehicles are subject to an import tariff of 20 percent. Also assume that U.S. components are used in the vehicles assembled by South Korea and that these components have a value of $10,000.
The price of an imported vehicle to the U.S. consumer after the tariff has been levied is:
a. $22,000
b. $23,000
c. $24,000
d. $25,000
10 ) If the current account balance shows a surplus, and financial account receipts exceed financial account payments, then the official reserve transactions balance
a. must be positive, indicating an increase in U.S. international reserves or a
decrease in foreign central banks’ international reserves.
b. must be negative, indicating an increase in U.S. international reserves or a
decrease in foreign central banks’ international reserves.
c. must be negative, indicating a decrease in U.S. international reserves or a
decrease in foreign central banks’ international reserves.
d. must be negative, indicating a decrease in U.S. international reserves or an
increase in foreign central banks’ international reserves.
WHAT IS THE ADVANTAGE OF MIXED ECONOMY?
We know that milton friedman was a big influence in the economic community, renowned for his work but how has his contributions influenced our understanding for the role & significance of money in the economy?
What have been the drivers of the mortgage default rate in the 2008 recession compared to the late 1980s/ 1990s?
Hi, im not quite sure how this works because im new on the blog and i dont know where you ask questions. i seriously need help with this question, i don`t know what im supposed to do.
It says prove that Marginal Cost is equal to the prise of commodity divided by the marginal product i.e. MC=Px(1/MP)
Just a quick one. Are UK banks paying interest on the government bailout they received?
Economists talk about wage inflation causing price rises, but doesn’t this betray a certain ideology? They make it sound like a bad thing, unions winning greater rights for their staff. But wouldn’t a left wing economist argue that profit in a capitalist system is simply unpaid wages? Rather than taking a cut in their profit, companies pass on the increased costs to the consumer, so does that mean that wage rises in the public sector don’t lead to inflation, because government departments don’t have anything to sell to the consumer that they could increase the cost of? Also, if anti-trust and competition regulations were properly enforced, doesn’t it mean that companies wouldn’t be able to pass on increased costs to the consumer, because of competition, so the workers would get their wage rises, the consumers would get their cheap goods, inflation would stay low and the only negative outcome (for the capitalist) would be that they would earn less profit?