Economic Questions V

467 thoughts on “Economic Questions V”

1. Hello connel wise

   Not just UK but every country have Phenomena. One simple tool is always used. Interest rates are decreased. It is general concept that lower interest rates will boost investments and make more employment. This will also decrease opportunity cost of investment. There are also given some incentives to industry and exporters. Governments also try to help some failure institutions for surviving. It pumps more paper money into economy. [email protected]

2. Why Lower crude oil rates are not always beneficial

   It is general considered that low rate of crude oil is an advantage to western economies.
   Yes it is in short run , but there is also another side of coin. Rates are much lowered than natural rate. Rates do not represents its inner value. It just shows market value which is just result of willing of cheap oil . It is sure, one day will come when it will receive its true value like $300per barrel or more. Than it would be more difficult to adjust. This is political value of oil. Natural value of oil is like a thermometer which guide us what to do. If rate of oil is increased , it may encourage people to think other options.
   If crude oil is $70per barrel it will discourage people to use other renewable resources. If crude oil is $90per barrel , there would be more investment in alternative resources. As price of oil increases it would be more profitable to invest in other energy sources.
   Economics predicts that long run is most important period of performance.
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3. What are the advantages and disadvantages of the following levels of economic integration?

   Free Trade Area (FTA)
   Customs Union (CU)
   Common Market (CM)
   Economic Union (EMU)
   Political Union

   I don’t think this question will just be of benefit to me but to the majority of people that are taking the OCR F585 exam this February.

   Thank-you for providing us with this site, I’ve found it invaluable and I’m sure I’m not the only one who has.

   Thanks 🙂

4. Hello Aaron

   These are time consuming issues. I am enplaning only some of them
   Free Trade Area-
   Advantages- FTA boosts economic growth. It encourages industry and trade.
   It create more competitive market. Consumers also have benefits from this. They can get goods at fair prices. It can also encourage economy of scale production.
   Disadvantage- Biggest advantage is that it can destroy local industry and trade. Small business may has negative effects. It may create more unemployed in local areas as people will use other area ‘s production.
   There are more advantages and disadvantages, but I have no time at the moment .
   Ok
   HAPPY NEW YEAR
   [email protected]

5. Read the following write-up and answer the questions given below:
   Economic Monitor
   Shawn W. Crispin
   Thailand, one of Asia’s fastest expanding econ¬omies in 2003, is showing signs of a slowdown. A series of economic shocks—including spik¬ing global oil prices, the re-emergence of bird flu and an unexpected new surge of non-performing loans in the banking system—have all hit business confidence.
   The surge in fuel imports drove Thailand’s import bill up 37% year on year in August, and sagging global demand plunged the trade balance into deficit and put new pressure on recently replenished national coffers. Oil imports now account for between 8% and 9% of Thailand’s GDP, nearly double the recent historic moving average of around 4.6% of GDP, according to Phatra Securities research.
   Those rising costs have hit manufacturing. Fac¬tory-usage rates fell from 71.3% to 66.7% between July and August. Production of electronics and food, two of Thailand’s largest export items, declined in line with slowing global demand and raw-materi¬als shortages, according to official statistics. A recent Bank of Thailand survey of top Thai executives showed that business confidence has fallen for five consecutive months to the end of August. The Stock Exchange of Thailand, which recently has rallied on foreign buying, is still down 12% so far this year, the worst performance in Asia.
   Policymakers have endeavored to buffer the economy from rising global fuel prices through sub-sidies, which some economists project could cost the government as much as 70 billion baht ($1.63 billion) if global prices remain at or near the current $52 per barrel for the remainder of this year. Sub¬sidies have so far helped keep domestic consump¬tion buoyant. Domestic consumption grew 3.2% year on year in August, a notable jump up from July’s 2.2% growth. New vehicle sales jumped in August in response to new excise-tax cuts.
   Some Bangkok-based economists doubt that the trend is sustainable. That’s because the government recently announced plans to scale back subsidies and allow fuel prices to float more freely in 2005. Kazi Matin, chief economist at the World Bank in Bangkok, estimates that rolling back subsidies will save 1% of Thailand’s GDP next year.
   Prime Minister Thaksin Shinawatra has said that his government’s infrastructure-spending plans will buffer the economy against external shocks and spark new domestic growth begin-ning in 2005. His cabinet recently increased the amount it wants to spend on new roads, rail-ways and government buildings from 1.1 tril¬lion baht to 1.7 trillion baht over the next five years. Some independent economists, however, question whether Thailand has that much fiscal room to manoeuvre.
   Economic officials say that part of the hoped-for 1.7 trillion baht will arise from private-sec¬tor sources and that new public investments will not significantly affect public debt, which is currently around 45% of GDP, according to official statistics.
   Independent economists contend that if pri¬vate firms do agree to help finance low-yielding infrastructure projects, they will require the entice¬ment of government guarantees on their invest¬ments, which by international accounting stan¬dards would appear as new liabilities on the national ledger.
   Questions:
   1. What is the expected change in the net export of Thailand and explain its impact of Thailand economy using AD and AS curves? (10 Marks)
   2. Other things being constant what is expected change in real GDP, due to changes in subsidies? (10 Marks)
   3. What is the expected impact of fall the business confidence? Explain with suitable diagram(s). (10 Marks)
   4. Will monetary policy help to increase the investment by private sector in the presence of fall in the business policy? Explain your answer. (10 marks)
   5. “Prime Minister Thansin Shinawatra has said that his government infrastructure spending plains will buffer the economy against external shocks and spark new domestic growth beginning in 2005”. What type of macroeconomic policy the Thailand government has taken? Support the prime minister’s statement with the theoretical background of this statement and with suitable diagram. (10 Marks)

6. If I have to interview certain individuals in order to prove the exceptions to the law of demand ….. which questions should be appropriate enough in order to satisfy my need within 3-4 questions ?

7. Hi.

   I was just wondering what you think the government ought to do to rectify the trade imbalances we have seen in recent years (i.e. importing a lot from China and maxing out the country’s credit card). Do you think it would be beneficial to pursue a protectionist approach to international trade – at least taxing imports to encourage domestic production, but not taxing any exports. Would this help to fix the problem or would it have unforeseen effects elsewhere in the economy? What would the overall effect be in the long term?

   Thanks

8. A country which decides to join a Monetary Union expects an increased ability to stabilize its output around the full employment level and keep inflation low compared with its initial ability under flexible exchange rates. is this true or false? why is that?

   True or False? – It is impossible for a country to run both current account surplus and capital account surplus in the same year.

9. Hello

   Do the income in real term and purchase power parity have the same meaning? If not, how do we distinguish them?

   thanks

10. Hi

    There is problem of trade imbalance. Main problem lies in labor costs. Labor costs is a big component in production in western countries. But China or India has cheap labor.
    So Production in these country is more profitable and cheap. So governments cannot sleep just trusting in the concept of liberal trade. Second trade balance problem may be grown due to crude oil. It would touch new heights in future. So it would also create huge trade deficit. Crude oil reserve are decreasing in America and Scotland.
    ok

11. Iits realy usefull for people who related with economics

12. Law of demand simply states that there is opposite correlation between
    Price and Demand of a quantity in case other things remain same and assumption is that
    Consumer is rational. Like us everyone want more happiness. This happiness in utility. With less price he can get more utility and he can get more with same money. But is not ultimate law. Unlike law of gravity it does not apply on every situation. For example, in America before credit crunch more houses were being sold at high rate than after credit crunch when houses rate were comparably low. It is law based on psychological behaviors of human being. Law is based on three ideas-(1) Consumer is Rational. With low price he can get more utility. (2) With decreasing rate more money is available for that commodity. (3) Some things are alternative to each other. So user can switch from one to other. Another fact, some people may buy something at low rate just for profitability. So they can sell it at high rate. But these people are not consumers. But it is very important law and one of main fundamental of economics. Commodities may be alternative to each other. Coffee and Tea may be considered alternative to each other. If Coffee rate decreases 20% but tea rate decreases 50%, it may possible demand of Tea increases, but despite rate of Coffee decreases, its demand also decreases . There other things not remained same, so law of demand does not apply on Coffee.
    Like law of general relativity it is law of general consumer not for special like special relativity
    Thanks.
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13. Hi Kaihua

    Purchasing power parity is a term we used mostly in calculating income specially per capital income. In this, income is shown how much income one has in term of purchasing power. Money is nothing, it is just a purchasing power. We compare per capital income not in form of currency but in form of purchasing power. Because not even a single currency is exchange at natural rate.
    Real term income shows income in currencies exchange rate. In general Low level income countries have high income at purchasing power parity than in real term because goods and services are cheap in their country than devolved countries.

14. Hi Akhsay

    Current account surplus means how much net money is coming in country . Money can come in form of exports, interest or dividend etc and can go in form of imports, interest etc. If net balance is positive it is current account surplus otherwise current account deficit.
    Capital account is related with capital. Capital account is difference between investment in a country by outsiders and investment in other countries by that countries. India has large capital account surplus.
    Yes it is possible for a country to have both current account surplus and capital account surplus at same time.
    Monetary Union is just a union made by some rich countries for controlling , stabilizing and sharing monetary policies. Joining a Monetary Union does not make a major effect on output and full employment. Yes it may have little effect on it. Poor countries may take some help from union in form of donation or loans.
    If a country joins Monetary Union, it may bring more discipline in monetary policies inside country.
    Thanks
    I am going to marry on 8th of February at Banga, Punjab. So after some days I would be busy in my marriage .

    bye

15. Hi Travis

    Who says china is going to become a great super power. I do not think so. Yes it may , but at the moment it does not seem.
    What is Super Power? A country is a super power if it has a very big share in world GDP and Technically it is leading in the world. Today even America is not a Super Power, it is just a biggest power in world.
    China ‘s GDP growing , But per capital income is much behind. It is important only because it has more than billion population. There is huge poverty in China.
    America was super power because it had huge resources. At that time America drilled huge quantity of oil more than any country in the world. It had huge agriculture surplus.
    But China is feeling shortage of energy resources. When Crude oil will go up, it economy would surely has bad effects.
    American Economy was much balanced but China is depending hugely on exports. It makes it dependent.
    Most important China is much behind in technology. Its technology is much older than America.
    I really never heard news about scientific and technical inventions from China. But these were common from America.
    Even China is depending on other currencies. American dollar was considered as a global currency.
    Yes if its GDP growth remains same in long run (but it is not sure), at one time it would be largest and important economy of the world.
    bye

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