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. I would like your help in answering a querry of mine………Is foreign exchange rate an indicator of economic growth?? pls reply

  2. Could you please explain what capacity utilization is and What is the relationship between utilisation and firms with excess cash?

  3. Does intervention by the FED and ECB create arbitrage opportunities, and ultimately be ineffective?

    For example, if the FED intervenes in bonds, and mortgage rates, can an investor collectively invest on the other side of the transaction, knowing well there will always be demand on the other side from the FED and ECB?

    i.e if the FED buys bonds, the investor shorts the bonds.

    In this sense, would the FED and ECB money effectively end up in the hands of the sophisticated investor, and not filter down to the wider economy?

    Do price controls ultimately lead to arbitrage opportunities? If this is so. then when do price controls break down?

  4. what is the role of the subsidies and the indirect taxes on the economic welfare? please i need any papers on this topic or your point of view about that>

  5. I came across this article (link: http://www.mumbaimirror.com/article/44/20120707201207070100431597a0f3243/Those-80000-unsold-flats.html) which says that there are 80,000 flats lying unsold in Mumbai and another 50-100k flats that are unoccupied. The average price of each flat is around 1.2 crores (12 million). However, there are new projects coming up daily and the prices keep on soaring. The author says that the prices are unlikely to fall though there is no demand for such flats because flats are not perishable commodities. I find this to be against the law of demand and supply. However, I would like to find out from you whether the author’s economic logic is correct or dodgy.

    Will appreciate if you will enlighten me.

    Thanks and best wishes.

  10. I’m currently on the topic of GDP.

    I’m confused with the Per capita GDP.Is it related to the Real GDP and does it considered the price change??

    • A poorer country with a weaker economy has a weaker currency. A richer country with a larger economy has a stronger currency.

      The UK pound or the USA dollar, or the German Mark (before their joining the Euro) were among the worlds strongest currencies. by contrast Vietnam is one of the worlds weakest economies and the Vietnamese Dong is a weak currency. It doesn’t take many USA Dollars to buy lots of Vietnamese Dong so Vietnamese products are very cheap.

      The Spanish peseta was a weaker currency than the USA/UK/German currencies I mentioned, so Spanish goods were relativley cheap.

      When Spain joined the Euro it now found itself with one of the world’s strongest currencies, so it’s goods were now much more expensive to those converting their GBP or USA dollars to Euros.

  13. What are the main problems of the UK current economy situation?
    I’ll be so glad if I see some answers…
    Best regards

  14. Why is it, that some countries e.g USA, UK, Japan etc can electroniclly create money whereas India, Germany, Euro etc have to work, trade and manufacture exports and growth to keep pace with the above mentioned ? Is it because they are white,speak with a plumb in their mouths, and generally BS to gain creditability ?

    How does Australia’s RBA manmage the Economy ( the envy of the World ) so successfully ? Do they keep intyerest rates high as compared with the USA, to attract overseas earnings and investments and profit thereby ? Or do they print money also ? I notice they have special drawing rights with the IMF, and World Bank, which they draw on, and which the greatest contributer is the US & UK, which has an endless supply of fiat currency ?

    Pls explain succintly. I am at my wits end explaining Economics to my students. For that matter, why is the European Common Market suffering, if it was that easy to print money ?

    • Think of it this way, you ahve a fire in your kitchen. (Not an oil fire). add some water, enough to put out the fire. Great, you’ve eliminated the fire. Flooding the kitchen would also put out the fire, but it would also completely ruin the kitchen. It’s important not to go too far!

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