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How Firms respond to Strong Pound

Examine Three ways manufactures may respond to a strong pound 1. Increase productivity and Efficiency. To remain competitive, firms need to try and cut costs so that they do not have to increase prices in other countries. However, they may already by as efficient as they can. Also productivity improvements may take a long time to occur. 2. Do Nothing. Demand may be inelastic for UK exporters. Also the strong pound may only be a temporary effect. Therefore, there is no need to change anything. However, if the pound remains strong for a…

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Why does the EU Give susidies to the Queen?

It may be hard to believe, but decades after being condemned as a grotesque waste of taxpayers money, the EU (through the Common Agricultural Policy) still give hundreds of thousands of £ in subsidies to rich farmers. It is estimated that the Queen, (who is hardly on the breadline herself) receives approximately £404,000 a year in European subsidies for her Sandringham estate and at least £140,000 for Windsor Castle. Some of the richest British aristocrats, such as the Duke of Westminster, the Duke of Marlborough and the Earl of Leicester,…

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Economics for Business Students

Reader’s Question: What are the importance of economics to a business student? There is a strong overlap between business and economics. A Business student needs to take into account these various aspects of  Economics. At various times I have taught Business Studies in addition to Economics. Several topics are the same. These are the key areas of overlap. Macro Economic Effects on Business Monetary Policy – Monetary policy involves changing interest rates to try and meet the government’s inflation target of 2% +/- 1. Interest rates have a significant effect on business….

The Importance of Supply Side Policies

The Importance of Supply Side Policies

Supply side policies are government policies which seek to increase the productivity and efficiency of the economy. They can involve interventionist supply side policies (e.g. government spending on education) or free market supply side policies (e.g. reduce government legislation) The main macro economic objectives of the government include: Higher economic growth Low inflation Low Unemployment Equilibrium on the balance of payments Quite often these objectives conflict with each other. For example, expansionary fiscal policy may contribute to higher economic growth and lower unemployment; however, it will be at the cost of inflation and a…

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Tips for Frugal Spending

What is the secret of preventing overspending? One important factor is to have a good attitude to money, if we have the wrong perspective it will be easy to spend recklessly or on items we don’t need. These are some of the characteristics of a frugal spender. Do I Need this? This is the most important criteria for deciding whether to buy an item. If we really ascertain whether the item is necessary, many impulsive purchases will be avoided. Also, when we examine its importance we are not swayed by sales…

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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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The Models who won’t get out of bed for less than EU 10,000

The plunging dollar has hit, even the world of fashion, with top models now demanding to be paid in Euros. Gisele Bündchen, a 27-year-old Brazilian model, is estimated to have a personal fortune of $150m (£72m) She is the face of numerous brands, but, appears to take a keen interest in financial markets. She is now insisting on negotiating contracts in Euro’s arguing that the dollar is likely to continue to remain weak in the coming year, (2008) 3 Reasons to get that $10,000 photo shoot in Euros rather than dollars. US…

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Overcrowding on UK Trains

Despite rising ticket prices and lower government subsidies, demand for rail travel in the UK is increasing and beating all expectations. Network Rail have published statistics showing that demand for rail services has increased by nearly 45 per cent between 1996-97 and 2006-0. Annual growth is increasing by about 8%. Yet, the DTI is sticking to its forecast of 3% growth per year, in an effort to avoid spending more money. Demand for Train Travel is increasing for Various Reasons Congestion on UK Roads. Demand for roads is also increasing faster than…