readers questions

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AD and Circular Flow of Income

1. How can you show an AD shift left or right, using the circular flow? The conflict in my understanding is W MUST equal J because of identities etc. Yet AD can only move if W>J or J>W. I thought that if that happened, that is macroeconomic disequilibrium. Not a shift. is it disequilibrium (excess supply or demand), that leads to a shift? (like market forces and ordinary D&S diagrams?) AD = C + I + G + X – M (total demand in the economy) Keynesian Model In the Keynesian model we…

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UK House Price Crash?

Readers Question: Critically evaluate the argument for and against the likelihood of an imminent house price correction in UK ? House prices in the UK have risen much faster than inflation; in the past 6 years average house prices in the UK have more than doubled. This has caused many to speculate that house prices are overvalued and are likely to fall, in the near future, to more realistic levels. These are the arguments in favour of house prices falls. House prices have risen faster than average incomes. This has made it…

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Is A Strong Canadian Dollar A Good Thing?

Q. Is A Strong Canadian Dollar A Good Thing? This is an interesting question. The effects of an appreciation are good for some aspects of the Canadian economy, but, create problems for Canadian exporters.The real winners are Canadian consumers who are able to buy US goods at a much cheaper price. US border towns are reporting booming trade as Canadians make the short trip across the border to buy more goods. example: Disney World trip: Oct 2006 cost C$3,839. In Oct 2007, the same holiday would cost C$3,428 Steak dinner in…