Economics Q + A – 6

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.

  1. Please don’t ask me to do your coursework / assignment e.t.c.
  2. Please don’t ask any maths calculations.
  3. The question and answer will be published here where everyone can see it (including your teacher).
  4. 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.
  5. I am looking to explain economic principles / ideas/ recent developments in economics.
  6. 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.

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448 thoughts on “Economics Q + A – 6”

  1. 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?

  2. Aren’t the fed essentially doing their job of supporting the financial system? Then why are they being criticized for doing their job?

  3. 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

  4. 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?

  5. 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?

  6. 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?

  7. 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?

  8. 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?

  9. 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.

  10. 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?

  11. 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?

  12. 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?

  13. 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!

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