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The balance of payments accounts are maintained on a double entry basis. An import of $1 million will show as a negative $1 million entry in the Current Account. When the Chinese exporter receives and deposits this $1 million check in its Chinese...
Fundamentally the change of the exchange rate reflects the difference of productivity growth between China and U.S.. In the past decade, the productivity of China grew faster than U.S. and therefore we see a long-term appreciation of RMB over U.S...
I recently had an argument in my fantasy football group that I believe an economist can answer. I need to define some terms and give some background before I get to the question.
I am in a 12 team league and we conduct a snake style draft every year to pick our players. A snake style draft is one in which teams are assigned a draft position and the draft is conducted 1-12 in the odd numbered rounds and 12-1 in even numbered rounds. Our rosters consist of 16 players. Every year your roster completely resets and we redraft in reverse order of standings (meaning that the team that finished last picks first and the team that finishes first picks last) with the following exception. You are allowed to keep up to 2 players, one player that you drafted (class B) and one player that went undrafted the previous year (class C). Provided that they are on your roster on Thanksgiving.
Players can be divided as follows:
Class A1 players cannot be kept by definition, and cannot be dropped from your roster.
Class A2 players cannot be kept, but can be dropped from your roster.
Class B players can be kept by giving up a draft pick that is 3 rounds earlier than where they were selected the year prior. i.e. If they were selected in the 5th round you would have to give up a 2nd round pick.
Class C players can be kept by giving up a draft pick that is three rounds later then where they are projected to be picked that year. i.e. If they are projected to be picked in the 5th round you have to give up an 8th round pick to keep them.
Generally speaking, Class A1 players are more talented than Class A2 players, who are more talented than Class B players, who are more talented than Class C players. Also, it is impossible to know how good a player will perform in future years, or what their projected draft position will be because those projections are not released until July of the following year.
As a result of these rules I adopted the following strategy after I was eliminated from this year's playoffs. I dropped all Class A2 and B players from my roster and picked up 16 Class C players using the following logic. Class A players are worthless for future years because I will lose them for nothing when the rosters reset. Class B players require me to pay a premium to keep them, and because they would need to vastly overperform expectations they are not worth the investment. Class C players are the least talented of the bunch, but I will have 16 chances to pick one that is in a good position to perform well, and I will get that player at a discount because I will be able to draft them later than when the market says they should be drafted. The other teams do not acknowledge this as a legitimate strategy. I believe that this illustrates relative value (valuable players that have no value considering my circumstance), opportunity costs (roster spaces that have worthless players but could have players with some value), and expected value (players who are worth very little now, but may have value later and can be drafted at a discount).
What do the economists think of my strategy?
As a post script, I tried to trade Class A players for Class C players before dropping them, but no team would trade with me because they thought I was giving up too much value for nothing.
Thanks for your ‘Ask an Economist’ question. I will provide some thoughts, but may not be able to answer it completely to your satisfaction given I do not fully understand how your fantasy league operates. For example, you do not explain how...
The sale of Treasury securities is the government's way of borrowing funds from the public. When the government sells bills, notes, and bonds, the public, the investors, become the government's creditors. The Treasury...
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To begin with, the premise of this question is somewhat mistaken. As was true in earlier wars, WW II did cause a large expansion of federal government debt both absolutely and relative to GDP. Indeed, the debt/GDP ratio reached about...
I am not sure there is any deep reason why a government would want to set a cap on wages. What purpose would it serve, other than to curb income inequality by lopping off the top rungs of the ladder? If that is desirable, then there may be other...
Take a simple textbook example due to Keynes. If you are spending beyond your means, a financial advisor may recommend some austerity on your behalf: ask you t cut spending, pay off your debt, and stay within your means. At the level of a country...
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Thank you for bringing this rumor to our attention. First, it would be helpful to understand what you mean by “a country’s success” or “potential”. I suspect you may be referring to a country’s growth in income (growth in GDP/economic...
Tariffs, like many government policies, have both costs and benefits. As your questions points out, we have heard much about the costs of tariffs in the ongoing trade disputes. But there are also benefits that accrue. For...
This has been quite an efficient market for many years until recently when the nurses started to compare pay for contracts on Facebook groups. Currently a group called Gypsy Travel RNs was created by an ex-nurse to help travel RNs find travel jobs - it has over 20,000 members.
Part of the information now being shared by the RNs is their pay package details quoted to them by the recruiter before accepting an assignment. They will compare what others are being paid and seek the opinion of any person in the group who makes an effort to respond, which is usually responded with "pay too low!"
Every person in this system acts on their own knowledge of the market. However, having hundreds of other RNs injecting their own views of an offer (accurate or not) seems to be artificially inflating the RNs side of the market, which drives up the costs for the hospital side.
It could be argued this is what other consumers do for other large purchases that might be negotiated. However, there are no established Facebook groups with 20,000+ home buyers all currently active at the same time in the market comparing offered prices.
These types of groups keep growing - would you consider this type of system a cartel? It this even legal?
Let me first state that I cannot answer the legal part of the question. Antitrust litigations often involve economists to show empirical evidence of abuse of market power and to determine the extent of damage the cartel has caused to consumers...
Additionally, when the job numbers are released, does it account for individuals working two jobs to make ends meet?
Politicians can claim credit for whatever they want – and typically they do claim credit for everything that looks good and blame everything that looks bad on their opponents.
The more pressing question is whether they should take...
It is not possible to provide a very good answer to this question because because it is not very clearly posed and is not specific about the desired remedy. Also, the answer below represents some off-hand views of an economist and, under no...
The difference is between real and nominal growth. The GDP of a country is the $ value of the goods & services produced by that country in a year. Say, the GDP of a country in 2010 is $100 and that in 2011 is $110. The increase could have...
A mutual savings bank (MSB) is a chartered financial intermediary that operates as an association of individuals who are depositors, also known as members. MSBs are owned by their depositors, not stockholders, and this means that an MSB’s...
GDP is the $ value of the total value of final goods and services produced in a year. That is the income definition. There is an equivalent expenditure definition. Loans are financial assets and all financial assets and liabilities are not...
1. Because of the tariff on US soybeans, China buy soybeans from other countries. How can other countries increase their production to accommodate this sudden increase of demand? You cannot just grow more soybeans by flipping a switch. Supply and demand suggests there was an equilibrium before. Those buyers who "lose" their orders to China have to find soybeans somewhere else. Does it mean they come back to the US farmers because they are the only producers left in town?
2. China is a big soybean buyer and can move the market. Soybean prices have been fallen since the tariff announcement, factoring in the impact of the tariff. Does it mean it hurts other producers like Brazil? But why there are reports saying Brazilian farmers are happy about increase in export? They don't suddenly produce more to sell at a lower price. According to Business Insider, Brazil is estimated to produce 3.5% more year-to-year. Is it enough to cover the loss in lower prices?
3. What happens to the US unsold China-bound-supposedly soybeans? Are they sold to other nations as mentioned above, or they are left to rot?
The policy-driven increase in the import price of U.S. soybeans into China generated a change in relative soybean prices across the globe, making U.S. soybeans relatively more expensive and soybeans of other origins, such as Brazil, relatively...
The need to pay it back would discipline the actions of the borrower, make them choose more worthwhile projects. This would raise efficiency.
Thank you
Projects like temples and pyramids, as with public monuments today, represent a choice about how labor effort in a society is directed. Some labor is required to produce food, shelter and clothing that are necessities for sustaining life. Beyond...
Does his claim hold up? If other countries have enacted similar bans, what happened afterwards?
Context: https://www.theguardian.com/australia-news/2018/jun/09/live-export-opponents-should-check-their-moral-compass-minister-says
Cheers!
I am not aware of any restrictions on live animal exports centered on animal welfare concerns. Concerns about animal disease outbreaks and food safety have primarily led to trade restrictions on live animals, meat, and animal products. A little...
1) Why does a transportation bottleneck cause Canadian oil to trade at a discounted price? Is it simply because rail companies have more leverage in this situation, as they have an effective monopsony as a buyer, a.k.a. near-monopoly over transportation? And if that's the case, is the oil sold to the rail company, who is able to negotiate a discounted price at which to purchase the oil from the producer?
I suspect it may have something to do with the fact that rail companies seek to secure long-term contracts with clients, so when oil producers want to use rail services just for the short-term, until new pipelines can be built, rail companies refuse to pay a high price for the commodity being transported (alternatively, rail companies demand a higher fee to transport the commodity). But again, I'm not clear about whether or not rail companies actually purchase the oil and then sell it on to refineries. And if a Canadian rail company does purchase the oil, then the revenue stays in Canada, doesn't it?
2) I have read that rail transport only adds marginal export capacity compared to what's needed, so perhaps the oil producer/rail transaction has a negligible effect on price? If that's true, then I'm really confused.
3) Is it simply just that a transportation bottleneck causes excess oil supply to build up, reducing its market price? But I thought that a bottleneck would equate to less supply, since it can't be exported as quickly, and therefore its market price should rise.
Great question! In general, we don’t need a monopsonistic setting to explain crude differentials between WCS and WTI. In a competitive market, prices for the same product (oil, corn, etc.) can diverge in different markets for two...
https://www.agriculture.com/news/business/doud-china-is-stockpiling-world-s-grain-supplies
Mr Doud, the chief agricultural negotiator for the U.S. trade representative, has put out statistics saying that China has been stockpiling large amounts of the world’s residual supplies of grains and other commodities and says that stockpiling these commodities is “depressing prices for every other farmer across the globe,”. But why would stockpiling lead to depressing prices? It would seem to me that taking residual commodities off the market (stockpiling) would have the opposite effect; that it would create greater competition for the remaining supplies, which would lead to higher prices.
The impact of stockpiling commodities on prices depends on the timeframe. While the stockpiling is occurring, your reasoning is accurate. The stockpiling is removing supplies from the market, creating more intense competition for the remaining...
Inflation is the natural outcome of price changes brought about by market forces and governmental forces. It is the rate of change in the price level that, in a country like the U.S., is entirely determined by market forces and the actions of the...
Bitcoin itself doesn't affect global financial markets very much now. It has been used with some unlawful activities such as purchasing drug and money laundering. It certainly can be and have been used to violate capital regulation law in some...