How does expansionary economic policy impact the stock market?

July 8, 2024 No Comments

A: Expansionary economic policy leads to increases in the stock market because it generates increased economic activity. Policymakers can implement expansionary policy through monetary and fiscal channels. Typically, it is employed when the economy is slipping into a recession and inflationary pressures are dormant. Fiscally,

How do tariffs protect domestic industries?

July 8, 2024 No Comments

A: Tariffs are essentially taxes or duties placed on an imported good or service by a domestic government, making domestic goods cheaper for domestic consumers and imported goods more expensive for companies exporting goods from their industry into the domestic industry. Tariffs are normally levied

How does fiscal policy impact the budget deficit?

July 8, 2024 No Comments

A: Fiscal policy refers to any uses of the government budget to affect the economy. This includes government spending and levied taxes. Policy is said to be expansionary when spending increases or when taxes are lower. Conversely, policy is contractionary when spending decreases or taxes

How do economists measure positive and negative externalities?

July 8, 2024 No Comments

A: In economics, an externality is defined as a cost or benefit incurred by a third party as a result of economic activity to which the third party has no relation. Economists use equilibrium models that succinctly measure externalities as a deadweight loss or gain

How do financial market exhibit asymmetric information?

July 8, 2024 No Comments

A: Financial markets exhibit asymmetric information in that in a financial transaction, one of the two parties involved will have more information than the other and will have the ability to make a more informed decision. When it comes to the purchase or sale of

How Do Fiscal and Monetary Policies Affect Aggregate Demand?

July 8, 2024 No Comments

A: Aggregate demand is a macro-economic concept representing the total demand for goods and services in an economy. This value is often used as a measure of economic well-being or growth. Fiscal policy affects aggregate demand through changes in government spending and taxation. Government spending

How Do Fixed and Variable Costs Affect the Marginal Cost of Production?

July 8, 2024 No Comments

A: The total cost of a business is comprised of fixed costs and variable costs. Fixed costs and variable costs affect the marginal cost of production only if variable costs exist. The marginal cost of production is calculated by dividing the change in the total

How do government bailouts increase moral hazard?

July 8, 2024 No Comments

A: Government bailouts increase moral hazard by engendering a business climate in which companies feel they will be protected from the consequences of poor decisions and risky behavior. Because they no longer fear these consequences – at least not to the level they should –

How do government subsidies help an industry?

July 8, 2024 No Comments

A: Government subsidies help an industry by paying for part of the cost of the production of a good or service by offering tax credits or reimbursements or by paying for part of the cost a consumer would pay to purchase a good or service.

How do I differentiate between micro and macro economics?

July 8, 2024 No Comments

A: Microeconomics is the field of economics that looks at the economic behaviours of individuals, households and companies. Macroeconomics takes a wider view and looks at the economies on a much larger scale – regional, national, continental or even global. Microeconomics and macroeconomics are both

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