A feature of the UK housing market is the low quantity of new houses built compared to the long term growth in demand. Despite high house prices, firms are unable / unwilling to build as many as market forces dictate. The supply of housing is price inelastic. The lack of supply has meant that the …
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. You said that if Greece leaves the Euro, the Drachma will depreciate. Why will this happen? If Greece did leave the Euro, then the currency which replaced the Euro, would definitely fall in value. Greeks would soon see the price of imports increase. The foreign price of Greek exports would fall. If Greece …
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 …
“Where and who creates the money?” Looks like Newton’s “Law of conservation of energy: Energy never be created nor destroyed”. To be more clear, I will explain with 2 examples. First case : I work in a big retail company in USA and get paid bi-weekly. How my company is getting money? Retail company makes …
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.