Interest Rate Swaps Explained

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Interest rates swaps are a way for financial bodies to exchange risk on the movement of interest rates. They were originally designed as a way for firms to avoid exchange rate controls because interest rate swaps can be done in different currencies. Interest rate swaps are one of the most common type of derivatives and …

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Should Government Legalise and tax Cannabis?

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The arguments for and against the legalization of cannabis and the taxation of the good by the government.

Legalising cannabis and placing a tax on the good has several advantages

Advantages of legalising cannabis

1. The Government can raise revenue from the tax. Because demand is likely to be inelastic, the tax revenue could be quite high. The tax revenues could be used to help finance health care and treat lung cancer. (things associated with dope-smoking)

cannabis
cannabis


2. It would reduce size of black economy. If cannabis was legalised it would reduce criminal activity. It would also free up police time to investigate more serious crimes and drug use.

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Saving, Capital Stock, and Levels of Investment

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“Maintaining and expanding a nation’s stock of capital requires saving.” Evaluate and explain. Is the assumption of full employment of any relevance?

Capital Stock is the level of productive capacity in the economy.

Saving and Investment

  • There is an important economic idea that Savings = Investment. The logic is that without bank deposits, banks are not in a position to lend money for investment.
  • An economy with a low savings ratio has little funds to finance investment because it is all being used to finance current consumer spending.

However, higher levels of saving do not necessarily lead to more investment. The extra saving may not encourage people to invest more. E.g. In the great depression, individual savings did not encourage investment. Keynes called this the paradox of thrift

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Question: What is the Economic significance of the construction industry to the UK economy?

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Readers Question: What is the Economic significance of the construction industry to the UK economy, how it impacts, with respect to trend in economy. According to BIS The UK construction industry contributed 9.2% of the nations GVA (Gross Value Added) in 2007. The UK construction industry consists of over 250 000 firms employing 2.1 million …

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Finding alternatives to oil and fossil fuels

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Readers Question: Discuss the case for and against relying on the market mechanism to produce clean alternatives sources of energy that can replace fossil fuels such as oil and coal. (15) Fossil fuels are non-renewable resources. Therefore, as they run out, the price will rise. This will create an incentive for firms to look for …

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Bank Bonus Windfall Tax 2010

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In 2009, Alistair Darling introduced a 50% tax rate on bank bonuses of more than £25,000. The bonuses would be paid by the banks rather than employees. I spent a lot of last year, saying how much tax revenues had fallen. The credit crunch and recession caused many traditional sources of revenue to dry up. …

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