Ask an Economic Question 2014

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 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

If comments are closed: email


335 thoughts on “Ask an Economic Question 2014”

  1. An engineer decides to run a business of marketing a petroleum product using his saving of $50,000.00 as the initial investment. He rents an office space with the rental of $1,000.00 per month as a location office and at the time keeping stock for the product. He hires a marketing graduate to help him with the salary of $1,500.00 a month. He was offered a job as an engineer for a company with the salary $3,000.00. He also can keep his saving with the bank with interest rate of 10 percent a year.
    After a year of business, the engineer recorded the total sales $91,000.00.
    Evaluate and comment the engineer’s business decision from an economic point of view.

  2. Hi,
    I have two questions:
    First, if a government imposes a tax on wages and it has to be paid by the employer, do firms or workers (indirectly) end up paying the tax?
    Second, if we suppose that the labour market is perfectly competitive and labour supply is completely inelastic, when the government imposes such a tax, what happens to the level of employment?

    Thank you

  3. I’m an American, and I have a question on tariffs. Donald Trump has said he will place a tariff on all Chinese steel, and on Mexican cars. My question is, “Are tariffs still useful, and if so, why not put tariffs on all cars from Japan, Korea, Mexico, and Germany?”

  4. One of the macro economic indicator that is monitored by organizations is “the contribution of construction to the GDP”. This is measured in terms of percentage contribution of construction.

    My question is:
    What does this comprise? Does it include large infrastructure projects/oil refineries nuclear plats etc or not?

  5. suppose a consumer has 90 dollar, available to be divided between commodities A and B, and suppose the unit price of B is fixed at 20 cent, what will be his demand equation for A IF his marginal utility function for A is written as Utility =log Xa +2log Xb.

  6. When working with GDP data, economists are using the market value of aggregate output in order to facilitate comparisons across years rather than just the amount of output itself (e.g. the value of refrigerators and apples produced rather than the quantities). Why is that–what problem does this address? This solution of using values is not a perfect solution. What new issues arise when we try to compare market values of aggregate output across time periods. How do macroeconomists attempt to address this issue?

  7. I have a question here.

    The natural rate of unemployment in an economy is 5 %.
    What will happen if a government persists in trying to achieve a target rate of unemployment of 3 % by expansionary monetary policy?
    A an accelerating rate of inflation
    B a diminishing rate of inflation
    C a high but constant rate of inflation
    D a negative rate of inflation

  8. When “new money” is created through the issuing of government bonds to the Bank of England, not through lowering interest rates or through money created from loans, why doesn’t the debt get paid off straight away as through the fractional reserve process around 9 times the borrowed amount will be created when in circulation? Or does the debt stay with all money created from the borrowed amount? I wonder this because the Bank of England still owns around 25 % of the U.K’s national debt, would appreciate this being explained

  9. How does the revaluation of the domestic currency of a country with a fixed exchange rate and fixed domestic price level affects domestic interest rate and output. Derive a result assuming a limited capital mobility


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