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£10 History of Money

What happens if I take a £10 to the Bank of England? If you look at a British £10 note, it says “I promise to pay the bearer on demand the sum of ten pounds” Therefore, if the Bank of England is true to its word, you should be able to go to Threadneedle street and demand the value of ten pounds in Gold. Of course, a ten pound note, has no intrinsic value. It is used to merely act as a medium of exchange. There was a time when the…

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Top 10 Tips for Saving Money at Christmas

1. Reduce expectations of Presents Always under promise presents. If you start promising a lot of gifts it becomes very pressured for you to spend money. Start working on this as soon as possible. If your children expect very little, they will be happy when they get a bit more than what you promised. 2. Eat In. At Christmas time, restaurants often charge a premium. With drinks, eating out can become very expensive. Unless you really hate the idea of cooking and washing up, eat in. – It is easier to create…

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House Prices and Consumer Spending in the Economy

Readers Question: in what ways can changes in house prices effect consumer spending, and hence an economy as a whole? The Housing Market places a crucial role in determining the state of the UK economy. This is because:Many consumers are also homeowners. (75% of houses are privately owned – higher than in European countries like France) Houses are by far the biggest form of wealth.What Would be the effect of falling House Prices on the UK economy? Confidence. The value of houses plays a big role in determining homeowners outlook for the…

Subsidy for Solar Panels to reduce Power Use

Subsidy for Solar Panels to reduce Power Use

Readers Question: What effect it will have (on electricity market) if there is an introduction of subsidies to consumers who install green energy sources e.g. solar panels? If there is a subsidy to green energy sources it will shift supply (of solar panels) to the right and therefore reduce the price of solar panels. The effect will be a slight reduction in demand for conventional electricity sources as some people now get energy from solar panels. Diagram Showing Effect of a SubsidyHowever,…

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Competition in the Electricity Market

what effect will it have on the equilibrium of price and quantity if there is a change in the regulatory environment designed to encourage greater competition in electricity generation? If the regulatory environment is successful in increasing competition we would expect lower prices and greater output. For example, if the regulators found a way to reduce barriers to entry. This would encourage more competitors into the market, leading to lower prices. A lower price of electricity is likely to lead to a higher quantity, but, the effect will be limited. Demand…

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American Businesses and Borrowing

Readers Question: I have heard it said that “American businesses are considered, as a whole, borrowers”. What does this mean? I think it refers to the fact that most American businesses finance investment out of borrowing, rather than saving. Therefore, most of the big American multinationals have a balance sheet with heavy levels of borrowing. This is because they can easily borrow through selling shares on the stock market. Investors are willing to lend them money in the expectation of higher revenues in the future. Some of the companies with the…

Price of Oil and Electricity

Price of Oil and Electricity

Readers Question: what will happen to the equilibrium price and quantity if there is an increase in the price of oil that is used in electricity generation? If there is an increase in the price of oil, it means that the cost of electricity will increase. Therefore, the supply curve will shift to the left. This will cause an increase in price from p2 to p1 The quantity will fall from Q2 to Q1Note: However, demand for electricity is likely to be inelastic. This…

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A Levels to Become Harder

Previously, I have written about whether A Levels have been getting easier Generally, I think it is a shame there is less differentiation between good students and excellent students. The main problem is that the % of grades getting an A is too high. Therefore, there is too little discrimination. From next year, the new A Levels that will be taught will have the chance for outstanding candidates to get an A*. This is a good development The QCA have said they will be intervening to make sure  that A Levels…