Ask an Economist
The output determines which sector a particular activity falls under. If the output is a good (product), then it falls under the manufacturing sector. If the output is a service, then it falls under the service sector.
In your particular...
I was wondering whether a recession is the opposite of inflation or is it the opposite of economic growth. What is it, really, the opposite of?
Thank you
A recession is a period of general economic decline, a contraction in the GDP for six months (two consecutive quarters) or longer. In that sense, they represent negative growth.
This policy change would redistribute income from lower to higher income households because the current income tax is progressive while the flat tax would not be as progressive, if at all.
The change would also lead to the double taxation...
Your understanding is correct that government debt is “good” in the sense that it serves as a useful tool for conducting both monetary and fiscal policy. By allowing federal, state, and municipal governments to borrow, it lets these entities...
I think it is important in establishing policy to work from facts and not perceptions. While rural towns are getting smaller on average, not all are. While schools are consolidating in rural areas, they are also consolidating in cities as like...
It is useful to begin by noting that Nebraska has a higher proportion of its population living in urban areas (73%) than Iowa (64%). The reason is that Nebraska has only 4 metropolitan areas (Lincoln, Grand Island, Sioux City, Omaha), all of...
Various measures of the U.S. labor market are prepared and published by the Bureau of Labor Statistics (BLS), U.S. Department of Labor. The (civilian) labor force (L) is defined to be the summation of those in the non-institutionalized and non-...
Governors really do not create jobs. Their departments of economic development, as well as other departments, may provide assistance, subsidies, and other types of aid to industries, but they do not create the jobs. The industries create the jobs...
The nominal interest rate associated with an asset (for example, a deposit in an interest-bearing savings account) is the rate at which the dollar value of the asset increases over time. The corresponding real interest rate is the rate at which...
Your understanding is correct that government debt allows governments to handle economic recessions better. When the private sector employment and therefore consumption demand is shrinking, the government can increase its public sector spending (...
The national debt of the US is the amount owed by the US federal government and is the value of the Treasury securities that have been issued primarily by the Treasury and which are outstanding at that point of time. By far, the largest component...
If raising the minimum wage to $10.10 would be good for the economy, wouldn't raising it to $20 be better? If not, at what point are the good economic effects of a minimum wage outweighed by the bad?
If minimum wage laws were repealed, the vast majority of U.S. workers would not have their wages impacted. Through supply and demand, competitive market forces drive up the wage rates of most workers to levels considerably above the current...
To answer this question, it is critical to agree on the definition of "market failure." In what follows, by "market failure" we will mean a situation where a free market fails to provide an efficient allocation of goods and services (i.e., risk...
Economists distinguish broadly among three types of goods along the private to public continuum. Purely private goods are purchased and used by individuals and families. Another way of explaining a private good is to say that my use (or...
The writer of this question understands economics and the market failure associated with externalities very well. Thank you for such an informed and interesting question! The writer is quite correct that the fact that agriculture generates an...
As for the high price of apartments in China's big cities, I believe the supply and demand play the main role.
1. The supply in big cities is depressed by the heavy land regulation. There are two types of regulation. First, according to...
Under the gold system, either gold circulates as money, or there is a fixed relationship between the amount of currency in circulation and the amount of gold, given the dollar price of gold. In either case, it means that a valuable resource which...
The event that you are referring to is what economists call recessions. During recessions, GDP drops or grows significantly below normal times for a period of usually less than two years. Recessions are dreaded by many but not all economists....
1. All market participants have perfect knowledge.
2. Excess profit is only possible in the short run.
If all participants have perfect knowledge, wouldn't all producers instantly know about excess profit opportunities, causing all of them to switch to producing that product at the same time, causing the price to crash and all of them to experience losses? Or, with second-order knowledge, wouldn't they all know that they all knew about the opportunity, and none of them would switch?
Is there a resolution to this perfect market dilemma?
"I read a summary of perfect competition which said that: 1. All market participants have perfect knowledge."
An assumption that a market M for a good Q is a "perfectly competitive market" is not a presumption of perfect knowledge...
The local mussel farm has a cost advantage in supplying in its own town mostly because it saves on transportation costs. Even with that cost advantage, the local firm may not be able to fully exert monopoly power on the local market. It is easy...
When the Federal Reserve announces to the world that it’s going to slow down the economy to hold back inflation that has always meant that unemployment will eventually take a hit. In the three cycles since 1989 the unemployment rate starts declining 2.59-3.09 years after the Federal Reserve starts dropping the federal fund rate. The monthly unemployment rate has been falling at a predictable rate within 2.31% since January 2012. For some reason whoever is in the White House gets the blame or credit.
As noted, when the Federal Reserve changes the amount of “monetary stimulus” in the economy, it tends to push inflation and employment in the same direction. Lowering the level of stimulus (by raising interest rates) puts downward pressure on...
Unfortunately data are not readily available on the percent of hog firms using forward contracting or options. What is readily available through Mandatory Price Reporting (MPR) data provided by USDA’s Agricultural Marketing Service is the volume...
This week the Congressional Budget Office analyzed the effects of raising the minimum wage to $10.10. They say (Table 4) that it will raise the average income for families in poverty by $300, but also (Table 1) that it will raise the total income for families in poverty by $5 bn.
These two numbers would make sense if there were 17 million families in poverty, but the census says there are only 9.5 million families in poverty. The numbers about families at other income levels have the same issue. Somewhere a number or an interpretation is wrong -- but where?
CBO link: www.cbo.gov/publication/44995
Census link: www.census.gov/hhes/www/cpstables/032013/pov/pov04_000.htm
That’s an astute observation. As you say, $5 billion divided by $300 per family in poverty suggests there are about 17 million families in poverty. But the Census data cited in the CBO report indicate far fewer families in poverty. Updating your...
Are your students economists? If so, it will be difficult to fashion a legitimate bumper sticker in support of the minimum wage. Boehner’s quote is called the “Law of Demand” in economics. You might use:
“Because employers can pay...
Lifting boxes up to 150 lbs.
Loading and unloading trucks in a warehouse that can be freezing or sweltering,
Driving a large truck anywhere from 10-150 miles a day,
Customer interaction,
Route planning.
Now if the minimum wage was raised to $15, what would make me choose to work at this parcel company when I could work at a grocery store as a cashier? Wouldn't the new minimum wage increase cascade into other jobs in order to entice people to fill those more difficult positions?
I can see such a large jump in the minimum wage having unforeseen consequences. I would love someone's opinion on this. Thank you for your time!
The current federal minimum wage for workers in covered sectors is $7.25 an hour. As you suggest, raising the minimum wage to $15 an hour would motivate many workers who were already being paid $15 in the old regime to seek employment in less...
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