Readers Question: How can a smaller government fiscal deficit cause a larger international trade surplus? A smaller fiscal deficit means the government is reducing its borrowing. Therefore tax revenues must be increasing faster than government spending. A trade surplus means that the value of exports is greater than the value of imports. Suppose the government …
Discuss the economic problems that might arise from large numbers of people falling behind with their mortgage repayments The problems of people falling behind with their mortgage payments include: Mortgage defaults will rise causing people to sell houses. If people are forced to sell houses the increased number of houses on the market will depress …
Readers Question: Why might the public ignore future tax liabilities when making spending decisions? A tax liability is a tax bill that you will have to pay the government in the future. In theory, if you have a large tax liability in the future, you will reduce current consumption to be able to pay the …
The Spanish economy is facing many difficult challenges. Housing Boom and Bust. Despite a relatively prudent banking sector, Spain experienced a real boom in the housing market. This was partly caused by foreign demand for holiday homes. House prices rose and there was also a boom in construction. Construction accounted for a large part of …
Readers Question: How would you go about at answering the interview question “Where is the middle of nowhere?” Take your pick: Number 23 Station Road, Milton Keynes Where Bernard Maddoff deposited investors funds for safe keeping. ‘The middle of nowhere’ It is a way of emphasising the essential nihilistic concept of an object that doesn’t …
Readers Question: Greece has a current account deficit of almost 14% (!) of GDP and Greece is a member of the EU. How can it resolve the problem if it cannot devalue the currency ( the quick way out, which was used in the past when the greek drachma was around) and when productivity is …
Readers Question: Do you know if there is a link between an economic downturn and blood donation? Does more people unemployed mean people have more time to donate blood, are unemployed people under to much stress to donate blood or should governments pay for blood donars. First it depends whether blood donation is free (charitable …
Readers Question: You commented, “In the case of RBS they bought a stake in Amro a Dutch bank with heavy exposure to the US subprime market. Therefore RBS has had to write off a record £28bn and are now facing nationalisation” What exactly is nationalisation and is it a good or bad thing for a …