Demand Deficient Unemployment

Demand Deficient Unemployment

There are several different types of unemployment. The most significant, especially at the moment is, Demand deficient unemployment. Graphs of UK unemployment Demand Deficient Unemployment. This occurs when there is insufficient demand in the economy to maintain full employment. If demand falls, firms sell less and so reduce production. If they are producing less, this leads to lower demand for workers. Either workers are fired or a firm  cuts back on employing new workers. In the worst case scenarios the fall in demand may be so great a firm…

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Determination of Exchange Rates

Readers Question: What do you think are the consequences of a) stock market trade volume and prices b) raw material inventory investment on exchange rate? I don’t think the above will have any significant impact on the exchange rate. Stock market trade volume can be highly volatile. It is possible that high volatility may be a reflection of nervousness amongst investors. If the stock market volatility is only in that country, then the exchange rate may devalue as a consequence. But, this is only a small factor in the determination…

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What is the Difference Between a Debit and a Debt

Readers Question: what is the difference between a debit and a dete? I presume ‘dete’ is just an interesting way of spelling debt. 🙂 A debit item refers to a system of accounting which places a negative amount on the left hand side of an accounting column. A debit is associated with the purchase of assets or expense transaction. e.g. money leaving your account to purchase a factory. Definition of Debt. A debt is an amount of money owed to a particular firm, bank or individual. It could be…

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What Should Government do about its debt?

At the moment, an important economic and political question is when and how to tackle the government’s public sector debt. It is currently over £800bn (56%) but growing very rapidly. D.Cameron has been making a case that the government debt poses a threat to recovery and it should be tackled with a high priority. He makes the following points. High levels of government debt could cause the UK to lose its triple A rating status. A downgrade in  status would make it more difficult for the UK to borrow. It…

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The Market For Books

Readers Question: Are books inferior goods or normal goods? An inferior good is a good where a rise in income leads to lower demand. It is a good with a negative income elasticity of demand. “When I get a little money, I buy books. And if there is any left over, I buy food.” Desiderius Erasmus Unlike Erasmus, I think most of us would put food ahead of books. Books are generally considered a non-essential, luxury item. A rise in income enables us to purchase more. If you are poor you may just…

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Importance of Economic Forecasts

A reader was asking how the credit crunch may have been different if banks had correctly forecasted falls in house prices. To be sarcastic, we could say if the Captain of the Titanic had know he was going to hit an iceberg, he probably wouldn’t have sailed. Certainly, if banks knew house prices were going to fall 20-25%, they would (presumably) never have lent the raft of unconventional mortgages which had little chance of repayment. (This was particularly a problem in the US) The credit crunch was caused by many…

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Economic Questions V

You are welcome to ask questions on Economics. I am looking to explain economic principles / ideas/ recent developments in economics. Due to the volume of questions, I can no longer promise to answer. But, I will try if it meets below criteria. I will post the answer on this blog, for everyone to benefit from. I never email individual answers Please Bear In Mind Use google custom search (top right) to see if question has been asked. If I have already answered a question I don’t tend to repeat it. The replies…

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Importance of Economics in Our Daily Lives

I have previously written about The Importance of Economics. It is one of those posts where there are an almost infinite number of topics to consider. This post will consider the importance of economics in our daily lives. Economic Choices We are constantly faced with choices. It may be a matter of limited time. For example, at the weekend We could spend 8 hours working in a cafe at the Minimum Wage of £3.57. Or we could spend 8 hours studying for our A – Levels. Alternatively, we could choose to spend…