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Private, Public and Free Goods Defined

Readers Question: I really wanted know more about private, public, free and merit goods not luxury,normal and inferior goods.that makes absolutely no sense at all. well by the thanks for your answer. Free Good. A free good is a good needed by society but available with no opportunity cost. It is a good without scarcity. For example, air is a free good, because we can breathe it as much as we want. Water is usually another free good. Though in some countries, water can become scarce – then it is…

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Why Not Just Default on Debt?

A few people have asked why don’t government’s just default and not pay their debt back? Firstly, a government could effectively default just by printing money, creating inflation and making it easier to pay debt back. But, if the government does create inflation (print money) to pay off its debt or simply refuses to pay, there are real problems. Debt Defaulter If a government defaults on its debts, who is going to lend it money in the future? Once you get a reputation as being a defaulter, it will be very…

Annual Debt and Total Debt in EU

Annual Debt and Total Debt in EU

via The Budget deficit is the amount a government has to borrow in a particular year. Total Debt (known as public sector debt or referred to as national debt is the total amount of debt that the government owes – to private sector, Central Bank e.t.c) In the case of Greece, they already had a high debt, before the onset of the crisis. Even during reasonable growth, they had a high budget deficit and national debt as…

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Problems Facing Greece and Euro Video

I made a short video on some of the problems facing Greek economy and Euro below. Recently, the EU and Germany have been making suggestions that they will offer Greece a bailout – to protect the value of the Euro (see: Telegraph article). However, I’m sure any bailout will have strict measures for Greece to reduce their budget deficit. The Greek economy still faces many deflationary pressures. The end of the fiscal crisis will not be the end of their problems.

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Exchange Rate and Current Account

Readers Question: Can you please discuss the nature of the current account deficit and the exchange rate in the UK along with the theory that would suggest there is a relationship between the exchange rate and the current account. In theory, the exchange rate will have an impact on the current account. If there is a depreciation in the exchange rate. Then that particular country will experience a fall in the foreign price of its exports. It will appear more competitive and therefore there will be a rise in the quantity…

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Drastic Economic Measures

Whilst the UK is slowly struggling out of recession – spare a thought for Greece, who are experiencing a real economic crisis – partly of their own making – and exacerbated by the straitjacket that EURO membership entails. The Greek economy has several significant problems Current account deficit of 14% of GDP – their exports just aren’t competitive – and they can’t devalue, since they are in the EURO Government borrowing has increased sharply – public sector debt is now over 100% of GDP and still increasing. The market fears that the government…

Reasons to be Hopeful

Reasons to be Hopeful

I was looking at the scale of previous recessions. The current recession, which technically ended last quarter with a 0.1% rise in GDP, is the second worst on record. I was surprised to find that in the Great Depression, UK GDP only fell 10%. However, it is somewhat misleading. The UK economy struggled in the 1920s (due to deflation and overvalued pound – see: Economics of the 1920s). Thus, unemployment was already high at the start of the Great Depression. In the US, output fell 30%,…