Question: Why do we have a VAT rate of 17.5% on many ordinary goods and a tax rate on petrol / tobacco of over 50% – yet when people propose a tax of 0.01% on currency transactions it is denounced as unfair and economically damaging? At the G20 summit, Gordon Brown, proposed a version of …
Readers Question: Is it a good idea for the Baltic states to adopt the Euro before they have met the convergence criteria? Latvia and Lithuania have a target date of 2013 for joining the Euro. Estonia by Jan 1 2011. The four main convergence criteria for the joining the Euro are: Low inflation Low Government …
Readers Question: Is it possible the phenomenon to have a relationship between GDP and house prices where an increase of the mean GDP to lead to decreased house prices? Yes, An interesting phenomena is that UK house prices have shown an increase during 2009 – despite a prolonged recession. Typically, in a recession, you would …
Fear is a powerful emotion which can have significant economic implications. Often real fears are ignored in a wave of over-exuberance. Sometimes, if people had greater fear of getting into debt and falling asset prices e.t.c, the economy would be less prone to bubbles and the consequent mess. Perhaps fear isn’t the right word. – …
Readers Comment: I believe if you want to solve the recession then look at footballers. they earn millions and for what/kicking a ball around!! I think their wages should be cut down to say 75k a year and the remaining money should be used wisely. This recession illustrates that economic policy often involves making decisions …
Readers Question: What effect does expansionary fiscal policy have on the fishing sector? If successful, expansionary fiscal policy will increase Aggregate demand and increase the rate of economic growth. In a recession, expansionary fiscal policy could play a significant role in increasing level of living standards and levels of consumption. Expansionary fiscal policy involves changes …
Champagne is a very good example of a luxury good. (a change in income causes a bigger % change in demand) Furthermore, supply of Champagne is limited to certain regions of France. With this monopoly power over supply, French wine producers have been able to set very high prices. Champagne can easily go for over …
Readers Question: What is the difference between depression economy and underdeveloped economy? A depression economy suggests the economy is experiencing a deep recession, characterised by falling output and rising unemployment. An economy experiencing a recession could have a high GDP per Capita or a low GDP per capita. E.g. UK and the US have both …