Readers Question: I am much in favour of governments defaulting on what they owe to private financial institutions (as opposed to other governments). This would be in line with the ideas fuelling the current OCCUPY THE WALL STREET movement. I would very much like someone to comment if this is at all possible and practical. …
Readers Question: When a country faces a recession, can they just increase the import taxes? so the country local production is increased to meet the demand and improve employment as well as the economy? It is an interesting question because often policymakers are tempted to pursue this as a strategy to boost domestic demand in …
Readers Question: If a progressive taxation is going to supposedly “reduce the gap between the rich and poor”, how and why does this happen? A progressive tax means that we take a higher % of tax from those on high incomes (e.g. a 50% income tax rate for income above £150,000). If everyone paid a …
Readers Question: Can you Spend Your Way to Full Employment? Full employment implies. An economy without a significant negative output gap. Full employment requires positive economic growth, averaging close to the long run trend rate of economic growth. (in UK long run trend rate = 2.5%) Very low unemployment. Economists would say full employment is …
Sterlised Bond Purchases. This occurs when the Central Bank purchase government bonds without affecting the money supply, i.e there will be no inflationary impact of buying bonds from commercial banks.
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 …
Readers Question: I thought of an analogy and wondered if I am correct. Suppose there is a concert venue that seats 10,000 people. On one day, the Rolling Stones are scheduled to perform there. Tickets are nominally $50, but since the venue is likely to sell out, scalpers buy them up. Let’s assume that Rolling …
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 …