Readers Question From why inflation makes it easier to pay government debt 1. Why will wages increase with inflation? There is no law that inflation will automatically lead to higher nominal wages. It is possible for inflation to be higher than the nominal wage growth. In this case, workers see a fall in real wages …
Readers Question: How likely are we to go into a double dip recession? There are many reasons to be gloomy about the current global economic prospects. A technical recession involves two consecutive quarters of negative economic growth. We may avoid this actual fall in GDP, but we will definitely experience below trend economic growth – …
Standard & Poor downgraded the US fiscal position from AAA to AA. This reflects the credit rating agencies believe that the US fiscal position has deteriorated and they are more pessimistic over long term fiscal consolidation in the US. It means that the rating agency feels the threat of US defaulting on its federal debt …
Readers Question: What would happen if India was the only exporter of gold? India would have a monopoly in the export of gold. Given the recent increase in the price of gold, this would lead to a significant increase in foreign exchange earnings for India. If the export of gold was controlled by India, it …
In one sense the US is facing a debt crisis. The level of government borrowing has risen sharply as a % of GDP, and given current spending commitments, the forecast for borrowing is to continue to grow. Nevertheless, despite disputes over raising debt ceiling, the US doesn’t currently face a crisis like Greece or other …
Definition of Oligopsony occurs when a few firms dominate the purchase of factors of production. This means that the few firms have considerable market power in paying low prices for inputs.
Readers Question: What are the factors that influence the fixing of a minimum wage? The UK’s first National Minimum wage was established in 1999 and was set at £3.60 for those over 21. It was feared by business that a minimum wage would cause unemployment. However, over the period between 1999 – 2007, in the …
Readers Question: On Jan 2009 I asked a question on the greek current account deficit, the fixed EUR rate, the lack of competitiveness and the debt load and you expanded brilliantly on the dangers of the twin deficits and the deteriorating Greek credit quality. Now I just need to make a comment that all the …