Ask an Economist
Welcome to Ask an Economist, a public service of the Department of Economics at Iowa State University, designed to answer your economic questions.
Our talented faculty and alumni can answer questions on a variety of economic topics to help you make more informed choices about your day-to-day decisions--or to just add a more reasoned voice when talk of the economy comes up around the dinner table.
Questions & Answers
Does the market provide too many or too few products, relative to some social optimum benchmark? It turns out that this question does not have a simple answer.
Your wealth in terms of home currency will increase whereas in terms of foreign currency it will decrease. If your home country prices remain the same, it means your real wealth has also increased.
China’s total trade (exports+imports) as percentage of GDP is about twice that of the US. In this sense, the US is a relatively closed economy and therefore its monetary policy is (and ought to be) more domestically oriented.
ISU Extension has created tools to explore the potential benefits/payments from the programs in the 2014 Farm Bill.
Yes, large banks can in principle borrow funds at close to 0% from the FED and turn around and invest them on higher paying US bonds.
There are two components to investment in the national income identity. In addition to expenditure on capital equipment and buildings by firms, investment also includes additions to business inventories (goods that firms did not sell).
You are missing a key difference between the federal budget deficit and the public debt level. The deficit shows by how much the federal government expenditures exceeded its revenues in a given fiscal year; the deficit is measured per year.
Given that the standard definition of government spending does not include the repayment of maturing debt, your understanding is correct.
In your example, the infrastructure investment of $20B will be included in the next fiscal year expenditures in the full amount. Thus, the deficit during the next fiscal year will be $10B + $20B = $30B.
Let me answer the last question first. The markets are controlling the prices, based on supply and demand. So, depending on how you want to look at it, either everyone or no one is controlling the prices.
Thanks for your very interesting question. GDP measures the market value of production. It is not intended to be a measure of aggregate well-being but it is often used as such.
The implementation of monetary policy – e.g., how exactly a central bank raises interest rates – differs across countries and even over time within countries.
The Federal Reserve has a long history as the nation’s central bank. While there have undoubtedly been many changes in the U.S.
The answer is that stock prices are indeed determined by supply and demand. If you see no change in price when you trade, it is because the amounts you are trading are relatively small.
Here is a definition that I found on an OECD website https://stats.oecd.org/glossary/detail.asp?ID=1740. It is as good as any definition I have seen.
I always thought that it was the other way around: the closer you are to the departure date the higher the price.
In discussing the impact of economic policy on aggregate demand and the balance of trade in open economies, international economists often talk about two types of (non-monetary) policies: “expenditure reduction policies” and “expenditure...
Continue Reading AnswerIn the US at least, financing Govt expenditure/budget deficit by using more Federal Reserve notes is not an “usual” option (the way it is in India for example) is primarily because the central bank’s independence from the Treasury and the Govt’s...
When trying to quantify "civic satisfaction," we need to determine what a community is willing to pay, in dollar terms, to remove the landfill.
No. The world consumes about 100 million barrels of oil per day. US consumes 20 million, while China consumes 10 million barrels per day.
Thank you for your question. Yes, we have recently developed a new Iowa Land Value web-portal which allows you to visualize the trends in Iowa land values at the county, district and state level.
First of all, I want to make it clear that, when a central bank increases its FX reserves, it supplies local currencies and increases liquidity in the money market. But this is certainly not the reason that China’s banking system grew so much.
Currently, Saudi Arabia’s foreign exchange reserve is about $600 billion. Saudi’s oil export is about 8 million barrels per day, or about 2800 million barrels per year.
There are several issues here. First, the US central bank, the Fed, is an independent monetary authority and does what it thinks best to keep inflation and unemployment low. They cannot be "asked" to print more money or change interest rates.
This is a great question. Currently interest (but not principal) on student loans is deductible within certain limits.