Economics Q + A – 6

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You are welcome to ask questions on Economics. Though you might also like to try google custom search (top right) to see if the topic has been covered before.

I am looking to explain economic principles / ideas/ recent developments in economics. I can’t promise to answer, but will try if it meets the criteria below.

  1. Please don’t ask me to do your coursework / assignment e.t.c.
  2. Please don’t ask any maths calculations.
  3. The question and answer will be published here where everyone can see it (including your teacher).
  4. I aim to try and simplify economics; as a rough guide I would aim at an understanding similar to a good British A Level student.
  5. I am looking to explain economic principles / ideas/ recent developments in economics.
  6. I will answer as a new post, if you leave email address, I’ll usually send quick email. Check home page of blog for new post. With question and answers

I studied PPE at Lady Margaret Hall college, Oxford University, and currently work as an Economics A Level teacher. I have also examined several different economic units for Edexcel AS and A2.

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448 thoughts on “Economics Q + A – 6”

  1. Why is top management salary considered excessive? If for example, the CEO salary is pegged to a 1% of profits, and the profits is 10billion a year, meaning the CEO salary is 100m is this excessive?

    What drives profit sharing for various professions? Why do some people get 1-5% of revenue generated, whereas others get 10-30% of revenue?
    If you are in the 1-5% bracket, is it possible to demand a 10-30% revenue generated as salary, assuming a company still makes money on that bracket? i..e is it possible to get wages way above market rates in the same industry?

    If everybody base their salary on market rates, is it correct to say that the salary will never go up or down significantly as no employer will pay above market, and employees will not accept significantly below market rates?

  2. China uses its foreign exchange reserves to buy US dollar assets. This reduces value of Chinese currency and increases value of dollar.

    How does buying us dollar assets reduce the value of chinese currency?

  3. Hi,

    I was wondering how you work out the productive and allocative efficiencies using a graph. For example, for allocative p=mc, which bit on the mc curve do you read from to say whether it is equal to it, as if you draw the p line across enough, surely it will always meet the mc line?

    Thanks!

  6. Could you please explain how low bond yields can be a reflection of low economic growth and high savings?

  7. Pls can you give the sample for the essay writing on the limitation on Economic Growth cos I want to start my essay but i don’t know how to start from.

  8. Following the austerity debate, what are the economic arguments for retrenchment? I know there are many against, i.e. the horizontal LM curve results in no interest rate crowding out with fiscal expansion, but I want to get a balanced perspective. What are the main arguments against retrenchment in economic terms?

  9. Can someone please tell me what percent of the UK debt is held by the Bank of England?

    Also is it true that
    1) If debt is held by the Bank of England then we (the people) hold our own debt?
    2) Interest paid to the Bank of England is really coming back to us?
    3) Quantitative easing is really a way for the Bank of England (us) to buy up debt.

    Thanks.

    Mike

  10. hello, i’m stevy and i would like to you to help me to answer the questions which is going to follow:
    1. What is the advantages to sell at higher price?
    2. Would you explain to me the concept of price control and the trategie to deal with it? Thanks

  11. In reference to the current debt crises and possible solutions, what are the benefits/disadvantages of the following:

    1. Central bank monetizing ALL the debts, and writing off its balance sheet-wouldn’t all the debt be resolved then?

    2. Imposing negative nominal interest rates to force spending

    3. Distributing unlimited cash directly to citizens instead of banks

  12. In currency investing, would it be more profitable to invest in a country with high interest rates and high inflation, or low to zero interest rates with low inflation? In other words, is the real interest rate more important than nominal? Other factors being equal, does it always mean that the currency of a country with higher real interest rate will strengthen over time compared to one with a lower real interest rate?

  13. Given the current environment, is it a valid argument of companies that increasing workers salaries will cause a loss of competitiveness?

    For example, cutting entry level and middle level workers salary while increasing management salaries will not change the profit levels of a company much.

  14. Can you explain what happens to wealth when e.g share price, property prices fall?
    Do they just vanish in to thin air, or is money just being transferred from one person to another? In other words, are all investment a zero sum game?
    What happens when prices rise?

    Is there a simple example that can illustrate this concept?

  15. Is it good policy for a company to maximize profit by e.g getting the cheapest possible deal, or worker, but thereby causing increased turnover or loss of renewable business when partners/workers discover they are being given a raw deal?

    If there are unlimited business partners/worker pools, is it in business interests to maximise their gain,by paying lowest costs and salary?

    What are the pro’s and cons and will this method of doing business harm its long term survival?

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