Can state and local governments in the US run fiscal deficits?

June 30, 2024 No Comments

A: There is nothing about the nature of state and local governments that prevents them from running deficits in the same manner as the U.S. federal government. A fiscal deficit is brought about whenever government revenue fails to meet government expenditures – an accounting reality

Can the Efficient Market Hypothesis explain economic bubbles?

June 30, 2024 No Comments

A: The efficient market hypothesis (EMH) cannot explain economic bubbles because, strictly speaking, the EMH would argue that economic bubbles don’t really exist. The hypothesis’s reliance on assumptions about information and pricing are fundamentally at odds with the mispricing that drives economic bubbles. Economic bubbles

Consumer Confidence Vs. Consumer Sentiment

June 30, 2024 No Comments

A: Consumer confidence and consumer sentiment are very similar in that they both refer to the degree of confidence consumers feel about the overall economy and their personal financial state. Consumer confidence or sentiment helps predict the level of spending that consumers will engage in.

Did the repeal of the Glass-Steagall Act contribute to the 2008 financial crisis?

June 30, 2024 No Comments

A: The repeal of the Glass-Steagall Act was at most a minor contributor to the financial crisis. At the heart of the 2008 crisis was nearly $5 trillion worth of basically worthless mortgage loans, among other factors. Although the repeal allowed for much bigger banks,

Do budget deficits “crowd out” the market?

June 30, 2024 No Comments

A: Government deficits crowd out private investment, although the mechanism through which that occurs can be more or less direct. The crowding out is in a relative, not absolute sense. Like any other economic good, investment capital is scarce. Any government bonds issued to pay

Do CIF charges affect the customs duties?

June 30, 2024 No Comments

A: The abbreviation CIF stands for “cost, freight and insurance.” It is a term used in international trade in reference to transporting goods from one destination to another through maritime shipping. The term has changed to include inland and airline shipments. When a buyer purchases

Do interest rates increase during a recession?

June 30, 2024 No Comments

A: Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest rates fall in tandem. The Federal Reserve has tools to control interest rates. During a recession, the Fed usually tries to coax rates downward to stimulate

Does a stock split lead to the gapping up/down of the stock?

June 30, 2024 No Comments

A: If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially affect a company’s value and will not lead to the wide changes in value that are seen in gaps.

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