Why is the assumption of ceteris paribus important in determining causation?

July 8, 2024 No Comments

A: In economics, the assumption of ceteris paribus, a Latin phrase meaning “with other things the same” or “other things being equal or held constant,” is important in determining causation. It helps isolate multiple independent variables affecting a dependent variable. Causal relationships among economic variables are

Why is there a negative correlation between quantity demanded and price?

July 8, 2024 No Comments

A: The law of demand is an economic principle that explains the negative correlation between the price of a good or service and its demand. If all other factors remain the same, when the price of a good or service increases, the quantity of demand

Why do supply shocks occur and who do they negatively affect the most?

July 8, 2024 No Comments

A: The exact nature and cause of supply shocks is imperfectly understood. The most common explanation is that an unexpected event causes a dramatic change in future output. According to contemporary economic theory, a supply shock creates a material shift in the aggregate supply curve

Why do we need a secondary market?

July 8, 2024 No Comments

In secondary markets, investors exchange with each other rather than with the issuing entity. Through massive series of independent yet interconnected trades, the secondary market drives the price of securities toward their actual value. Moreover, the secondary markets create additional economic value by allowing more

Why does fighting money laundering reduce overall crime?

July 8, 2024 No Comments

A: Money laundering is the process of converting funds received from illegal activities into ostensibly clean money that does not raise suspicion from banks and financial institutions. Terrorists, organized criminals and drug smugglers rely extensively on money laundering to maintain cash flow for their illegal

Why does inflation increase with GDP growth?

July 8, 2024 No Comments

A: Reported gross domestic product is adjusted for inflation. The growth of unadjusted GDP means an economy has experienced one of five scenarios: Produced more at the same prices Produced the same amount at higher prices Produced more at higher prices Produced much more at

Why is productivity an important concept in economics?

July 8, 2024 No Comments

A: The level of productivity is the most fundamental and crucial determinant of a standard of living. Increased productivity allows people to get what they want faster, or to get more of what they want in the same amount of time. Supply rises with productivity,

Who sets fiscal policy, the president or congress?

July 8, 2024 No Comments

A: In the United States, fiscal policy is directed by the executive and legislative branches. In the executive branch, the two most influential offices belong to the president and the Treasury secretary, although contemporary presidents often rely on a council of economic advisers. The U.S.

Who sets the global standard to stop money laundering and how is it implemented?

July 8, 2024 No Comments

A: The Financial Action Task Force (FATF) sets the international standard for fighting money laundering. Formed in 1989 by leaders of countries and organizations around the world, the FATF is an international body of governments that sets standards for stopping money laundering and promotes the

Who uses bills of exchange?

July 8, 2024 No Comments

A: Bills of exchange primarily act as promissory notes in international trade; the seller, or exporter, in the transaction addresses the bill of exchange to the buyer, or importer. A third entity, typically a bank, is party to many bills of exchange to help guarantee

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