Readers Question: Does it (financial crisis) have any possible positive effects for the future? It is an opportunity to repair a broken financial system and put in safeguards to prevent future boom and busts. For example, we could have policies which banks automatically hold more deposits during a boom to provide counter cyclical instruments. Better …
The River Cam in Cambridge. Recently, we looked at why water can be more expensive than beer, even though water doesn’t attract excise duty Water is the most important commodity in the world, it is indispensable for life, yet, it is also one of the cheapest. In many circumstances we can say water is a …
Readers Question: How much money should 18 year old have? I have been thinking about this for a while and was hoping you might be able to shed some light on the subject. Please help. Thank you in advance. There are frequent readers comments about the minimum wage for 16-18 year old Most seem to …
Definition of Efficient Market Hypothesis It is the idea that the price of stocks and financial securities reflects all available information about them. If new information about a company becomes available, the price will quickly change to reflect this. Three Types of Efficient market hypothesis Weak EMH. This states all past market prices and data …
Why do people gamble on the lottery but insure their car? When you gamble, in the long run, you lose money. Let us say, the payouts are 50% of the amount you pay in. Therefore, gambling in the long term makes no rational economic sense. Over time, the odds will even out and you will …
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 …
Readers Question: What do you think would happen if all depositors of a bank requested their deposits? The Banking would probably collapse – unless it could secure unlimited funding from a Central Bank or other banks. If a bank has deposits of £10billion. The bank will keep perhaps 1% in liquid assets (i.e. cash that …