Economics lets help

K4t

1. To avail of products not produced at home.
2. To avail of essential products not produced at home (e.g. oil)
3. To create jobs in exporting/attract foreign investment/Expanding business
4. To maintain stable international relations
5. To increase national income

Q. 3 factors that effect the Efficiency of Capital?

Chanandler Bong

Climatic Reasons (Oranges)
Lack of Mineral Resources (Oil)
To Increase Market Size
Greater Consumer Choice
Law of Comp Adv

Outline the factors which affect interest rates?

Gi joe!

Chanandler Bong wrote: »

Climatic Reasons (Oranges)
Lack of Mineral Resources (Oil)
To Increase Market Size
Greater Consumer Choice
Law of Comp Adv

Outline the factors which affect interest rates?

The interaction of the supply and demand of money
Central Bank as 'lender of last resort'
Degree of risk


State 5 advantages of direct taxation

Saul-Good

Could someone explain Bank Credit Creation to me in layman's terms? I'm having a bit of trouble trying to understand it, it's really poorly explained in my notes.

Much Obliged:D

Edit:I just noticed the question.
1.It's related to the tax payers ability to pay
2.low cost of collection
3.it's convenient for the tax payer
4.stabilises the economy
5.liability is known

ynwa_17

Saul-Good wrote: »

Could someone explain Bank Credit Creation to me in layman's terms? I'm having a bit of trouble trying to understand it, it's really poorly explained in my notes.

Much Obliged:D

I was in the same boat. Nowadays i know how to do it but i dont understand it lol. Ill give it a shot

Basically when someone makes a deposit into a bank account, the bank knows they only need to keep 10% of any reserves in cash (Primary Liquidity Ratio), so they can now loan out 900% of the deposit in the form of non cash money, ie credit cards etc.

Numerically its like this

Sean makes a deposit of €100 in his bank account. The bank know they only need to keep 10% in cash so this €100 is the 10%.

100 - 10%
1000 - 100%
900 - 90%

The bank has created €900 in credit, in non cash funds. Thats right from what i remember but maybe someone can explain it better or tell me where i've gone wrong because i think its going to come up and i'd like to know myself lol

Économiste Monétaire

Saul-Good wrote: »

Could someone explain Bank Credit Creation to me in layman's terms? I'm having a bit of trouble trying to understand it, it's really poorly explained in my notes.

Essentially it's a distinction between reserves (or 'cash' as ynwa_17 described above), deposits and loans. Here's an example I gave ages ago on the economics forum:

Note|Reserves €|Loans €|Deposits €
Central Bank injects €1,000 of new reserves|+1,000|0|+1,000
Bank 1 lends to Person 1|-|+900|+900
Person 1 purchases an aeroplane from Person 2|-900|-|-900
Person 2 deposits the money in Bank 2|+900|-|+900
Bank 2 lends to Person 3|-|+810|+810
Person 3 purchases a computer from Person 4|-810|-|-810
Person 4 deposits the money in Bank 3|+810|-|+810
Bank 3 lends to Person 5|-|+729|+729
Person 5 purchases blow-up-doll from Person 6|-729|-|-729
Person 6 deposits money in bank 1/2/3|+729|-|+729
....|""|""|""
Totals|1,000|9,000|10,000

K4t

Q. 3 factors that effect the Efficiency of Capital? Please!

superLeetive

K4t wrote: »

Q. 3 factors that effect the Efficiency of Capital? Please!

Marginal efficiency of capital depends on two sets of factors:
a. Short run factors, and
b. Long run factors

a. Short run factors

1. Marginal propensity of consumption
Increasing level of marginal propensity of consumption increases
marginal efficiency of capital. The intensity of consumption
encourages marginal efficiency of capital.

2. Income
Higher levels of income yield larger marginal efficiency of capital.
Increasing income will also increase conspicuous consumption.

3. Price level
During periods of inflation marginal efficiency of capital will be high.
Price levels with more money supply will increase capacity to pay.

4. Interest rate
Higher interest rates discourage marginal efficiency of capital. Higher
cost of capital increases cost of production thus reducing chances of
increasing marginal efficiency of capital.

5. Consumption expenditure
Higher consumption expenditure increases the marginal efficiency of
capital. Increasing consumption expenditure can be due to reasons
like income, price levels, demonstration effect or price illusion.

6. Government Policy
Government policy of taxation, controls on out put will reduce the
possibility of increasing marginal efficiency of capital.

7. Business cycles
Business cycles mainly deal with mood in business environment.
There can be business optimism or business pessimism. During
periods of business optimism the marginal efficiency of capital will
be high similarly, during periods of business pessimism, marginal
efficiency of capital will be low.

8. Rational expectations
A rational expectation is a post Keynesian concept, concerned with
business environment and business. It is regarding the business
adapting to changing policy, market, consumer expectation and
management of business with rational risk management.

b. Long run factors

1. Population
Though population changes even in the short run. The effect of
population can be seen only in the long run, by way of changes in the
pattern of demand and labor force.

2. Technology
Technology helps in the long run in reducing costs and making
production function efficient.

3. Alternative sources of raw material and energy
Alternative and cheaper sources of raw material and energy change
the production function and help in expanding out put and making it
economical.

4. Expanding markets
Expanding markets provide purpose for the industry to produce and

distribute. In the long run, mass consumption increase.

Q. List 4 ways by which the Irish government could use taxation to create a favourable climate for investment in Ireland.

lilmissprincess

superLeetive wrote: »

Q. List 4 ways by which the Irish government could use taxation to create a favourable climate for investment in Ireland.

1. Tax breaks to prospective MNCs as to attract investment
2. Decreased Tax as to encourage employment, therefore creating a better workforce.
3. Reductions in Tax may cause greater spending due to an increase in the amount of disposable income available.
4. Reductions in Indirect Tax = fall in inflation = less costs to companies= incentive.


Q: What is the relationship between average cost and marginal cost

K4t

MC > AC average cost is rising
MC < AC average cost is falling

MC = AC average cost is constant

Q. Effects of Low Interest rates on the Irish Economy?

barahsug

Decreas in cost of serving National Debt foreign component

Deman Pull inflation may result

Falling cost of borrowing

Decreased incentive to save

Decrease in the volume of bad debts



In costs of production, what's the relationship between the short run and the long run?

Du

barahsug wrote: »

Decreas in cost of serving National Debt foreign component

Deman Pull inflation may result

Falling cost of borrowing

Decreased incentive to save

Decrease in the volume of bad debts



In costs of production, what's the relationship between the short run and the long run?

short run slopes down due to spread of fixed costs and law of demand, slopes up because of law of DMR
Long run slopes down due to economies of scale, slopes up because of diseconomies of scale.
Long run is made up of the short run cost curve as all costs are variable in the long run (diagram).


What are the differences between supply price, transfer earnings and economic rent?

superLeetive

Du wrote: »

What are the differences between supply price, transfer earnings and economic rent?

Supply price is the minimum payment necessary to bring a factor into use and maintain it in that particular employment where as

transfer earnings are the wages which a factor can earn if transferred to the most attractive alternative employment and

economic rent is any payment to a factor in excess of its supply price (as explained above).

Q) Effects of the fall in the value of the sterling against the euro on the Irish economy?