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The distribution of income

The distribution of income is defined as the distribution of wages earned across a company, industry or country. I will be focusing on the distribution of wages earned across a country. There are both advantages and disadvantages of the equal distribution of income. If it was equalised and everyone earned the same amount, people would Read More

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Microeconomics

1. How is elasticity a useful concept for firms and government? Elasticity, which according to A.Neale and C.Haslam “Economics in a business context” is a term “used in economics to describe the relationship between a proportionate change in one variable and a proportionate change in a related variable”. Plain-speaking it is the measure of how Read More

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How might the increase in public expenditure over the last ten years be explained

How might the increase in public expenditure over the last ten years be explained? Why might the government want to reduce real public expenditure? Contrast the macroeconomic effects of a reduction in defence expenditure with those of a reduction in state pensions. An increase in public expenditure Every year the government spends billions of pounds Read More

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The basic economic problem

The basic economic problem is there are scarce resources to produce wants and needs of the people. So firms confront the three basic economic questions of what to produce, how to produce and for whom to produce. As we cannot produce everything, we need to decide what to produce and in what quantities. It determines Read More

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Fiscal Policy

First, Monetary Policy Committee (MPC) can consider a cut in interest rates. With cheaper borrowing, households will be induced to borrow even more to spend. Rise in consumption (C) will shift AD rightward thereby promoting higher economic growth. To produce more goods and services, more manpower will be required. This leads to lower unemployment. At Read More