Readers question: Who are the winners and losers from free trade? Free trade means that firms can export and import goods without tariff barriers. Free trade leads to lower prices and increased exports and imports. Economists are generally agreed that free trade leads to a net gain in economic welfare; as a result, economists generally …
A fixed cost is a business cost that is unrelated to output. They can also be referred to as ‘indirect costs’ Whatever the output fixed costs (FC) remains constant at £300. Average fixed cost (AFC) declines with increased output Examples of fixed cost Rent on premise Cost of buying machines and factories. Salaries of managers …
A trade deficit occurs when the value of imports of goods and services is greater than the value of exports. For example, in 2016 the US exports totalled US$ 1,450,457 million. Imports totalled US$ 2,248,209 million. (WITS) Source: Trade balance at St Louis Fed. Since 1990, the US has run a persistent trade deficit. The …
Definition of capital mobility – easy for physical assets and finance to move across geographical boundaries. Capital immobility – when capital faces restrictions on the free movement. What is capital? Capital principally refers to physical capital – durable goods used in the production process – machines, factories. This physical capital is determined by levels of …
Demand management policies are efforts to influence the level of aggregate demand (AD) in an economy. The two main types of demand management policies are: Monetary Policy Fiscal Policy To some extent, the exchange rate could be used to influence aggregate demand, but in practice, it is rarely used as a tool to influence aggregate …
In recent months, we have seen a dramatic drop in oil prices. For many consumers and business, this fall in the price of oil will be welcome reduction in the cost of living and a reduction in the cost of business. However, is such a steep fall in oil prices good for the economy? Benefits of …
Definition: Aid involves economic assistance from one country to another. Usually, aid refers to assistance from the developed world to LDCs – less developed countries Aid can take various forms: Debt Relief – Forgiving debt can save LDCs annual interest payments and leave them more resources for internal investment Direct AID- giving food, money and …
The UK government has a national debt of over 55% of GDP. It finances its debt by borrowing from the private sector. Its debt is managed by the Debt Management Office DMO 1. By issuing government bonds (gilt edged stocks) demand comes mainly from non- bank financial sector e.g. insurance co. i) e.g. Treasury 10% …