Ask an Economic Question

You are welcome to ask any 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. (I can usually tell if it is a homework question!)
  • Please don’t ask any maths calculations.
  • The question and answer will be published here so that 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

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2,583 thoughts on “Ask an Economic Question”

  1. Does the I M F support the removal of cash and the implementation of cashless economies ,this would enable minus zero interests rates in favour of borrowers over savers ?

    • omg FASTON , did you not READ THE PROMPTS lmao . this is literally a homework question . I’m snitching.

      • Omg, ur_mum maybe it’s not a homework question. Let them decide if it is a homework question. Don’t assume things.

  2. We are home educating at GCSE level.
    Our question relates to the three main roles of the financial sector (credit provision, liquidity provision and risk management)

    With regards to ‘liquidity provision’ by financial institutions, our textbook states this:
    ‘Liquidity refers to how easy it is to turn an asset into cash. Banks are the main providers of liquidity to households and businesses, and this allows them to continue to function when faced with unexpected demands for cash. Banks do this by offering, for example, overdraft facilities.’

    We understand how a loan secured against a house (for example) could be liquidity provision. However, we don’t understand why an overdraft facility, specifically, would be a liquidity provision and not a credit provision?

  3. I am reading about a rise in nationalization. How does a company decrease nationalization and not allow the government to take over? Many companies are talking about that now, especially on the internet

  4. I would submit that ‘Economic Growth’ (a sine qua non according to today’s political pundits) is not possible without fundamental harm to the Environment. There is a great deal of hard evidence to support this view (rising sea levels; depletion of biodiversity; plastics in the oceans; etc etc).
    Irreplaceable raw materials that have taken aeons to lay down, are being consumed at an increasing rate, due to a larger and larger population demanding an ever-increasing standard of living. This will lead to exhaustion of vital resources, and/or the rise in their real cost to the point that they cannot be afforded except by the rich minority.
    The only solution is to make more, with less – a dubious solution at best.
    I am therefore more convinced by “The Limits to Growth” (Meadows et al) model and its subsequent validation by factual evidence.
    Are Meadows and followers wrong? If so, can you persuade me that a convincing case for sustainable growth can be made ?

  5. Hi Tejvan

    Why are Economic growths happening? (No this isn’t a hw question bc I graduated High School)

  6. Marshall Lerner effect
    This “rule” states that unless the sum of the Elasticities of Demand for X and M is greater than 1, there will be NO improvement of BoP if the currency depreciates.
    I have a spreadsheet to check this. It shows (eg) that a sum of elasticities = 0.7 will see an improvement in (X-M)

    Below is a text copy of the sheet. It assumes a fall in exchange rate from 1.5 to 1.0.
    In Home country
    Import Qty Unit Price Total Value PED Qty Unit Price Total Value
    ProdA 50 £10.00 £500.00 0.7 32.5 £15.00 £487.50

    Export $ price $15.00 $10.00
    ProdB 60 £10.00 £600.00 0 60 £10.00 £600.00
    Change in qty calcd on US$ prices

    Surpls/Defecit £100.00 0.7 £112.50

    So, is the ML effect 100% correct (i.e sum lambda must be >1.)?

  7. When there is a negative externality in production marginal social costs are greater than marginal private costs.
    However when showing this on a diagram the marginal social cost is on the left of the marginal private cost. Shouldn’t it be on the right if it is greater? Like in the same way if demand grows then you show on a diagram the increase in demand as a shift to the right. Isn’t this new demand curve bigger than the previous demand curve on the left of it.

  8. Overtime how much will it cost if the U.S. turned its attention to being more environmentally friendly verse if it continued to increase carbon emissions?

  9. Based on your understanding of the theory of demand, supply and how markets
    operate, illustrate using relevant diagrams how the economic actors listed below would
    apply the elasticity concept to make business decisions:
    a. Producers of goods in a market
    b. Government

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