All Questions

Filter by
Sorted by
Tagged with
33
votes
6answers
5k views

Is zero inflation desirable?

Is zero inflation really desirable? To be more precise: Does inflation in real life have benefits that in some situations outweigh its social cost? E.g.: it works as a disincentive against holding ...
26
votes
2answers
33k views

How can I obtain Leontief and Cobb-Douglas production function from CES function?

In most Microeconomics textbooks it is mentioned that the Constant Elasticity of Substitution (CES) production function, $$Q=\gamma[a K^{-\rho} +(1-a) L^{-\rho} ]^{-\frac{1}{\rho}}$$ (where the ...
40
votes
11answers
7k views

What is the economic purpose of increasing the minimum wage?

It is generally accepted among economists that minimum wage warps the equilibrium point between the supply and demand of labor by instituting a price floor and increases unemployment for unskilled ...
16
votes
5answers
2k views

Implications of abolishing Fractional Reserve Banking on mortgages and interest rates

Suppose for a moment that someone with legislative power decides to abolish Fractional Reserve Banking and passes a law that forces banks to only lend the money they own, that is M0. What would be the ...
67
votes
13answers
22k views

Fundamental equations in economics

For the other sciences it´s easy to point to the most important equations that ground the discipline. If I want to explain Economics to a physicist say, what are considered to be the most important ...
17
votes
5answers
4k views

How do economies grow?

These days, we hear again and again about the so-called "need" for economic growth. But how do countries actually grow economically? That is, why/how does their GDP increase over time? ...
12
votes
2answers
2k views

What is the Gross Domestic Product (GDP)?

I suppose GDP is supposed to create a measure of a country's wealth/welfare, something easily indexable. But how exactly is it composed? And is its composition disputed? How good is it at measuring a ...
3
votes
1answer
5k views

Why is the short run average cost curve not a tangent to the long run average cost curve at the lowest point on the short run average cost curve?

The diagram from the Varian textbook shows that the SRAC curve is tangent to the LRAC curve at a point which is not the bottom of the SRAC curve. It would be really helpful if someone could explain ...
112
votes
16answers
19k views

How will non-rich citizens make a living if jobs keep getting replaced by robots and are outsourced?

Decades ago a factory job could support a wife and kids until retirement and they offered insurance, benefits, etc. Now, no more unions, those jobs as well as tech and customer service jobs are ...
45
votes
9answers
3k views

Seminal papers that later were proven to contain errors

I was reading on institutions, and I came across Acemoglu, Johnson and Robinson (AJR) paper on The Colonial Origins of comparative development: An Empirical Investigation, and this paper seemed so '...
9
votes
7answers
4k views

Mathematical Micro/Macro Economics Textbook Recommendation

I was formerly an economics major and now also majoring in mathematics. I want a textbook that is rigorously based on mathematics; not just using mathematics whenever the author wants, but in a more ...
7
votes
2answers
1k views

Elasticity of demand equals -1 but income decreases!

In my textbook, it's stated that: When $\epsilon < -1$, demand is elastic and raising price will result in smaller income, while lowering price will result in bigger income. When $\epsilon =...
6
votes
2answers
369 views

The Printing of Money for Paying Debt

I know that printing money causes inflation, but what if we print it to pay back our debts? For example, we have N dollars of debt to China. We can just print the N dollars and give it to China. ...
10
votes
1answer
319 views

Will a Guaranteed minimum income not eventually just be crowded out by inflation?

That is, if we implement a guaranteed minimum income, would inflation not eventually rise to a point where it is essentially useless? I would expect prices to be adjusted knowing people have a certain ...
5
votes
3answers
1k views

Price Elasticity of Demand for Positive Price Increases

What does it mean when the price elasticity of demand %Qd/%P is greater than one? Typically I hear that it means the demand is elastic since if, say, the price decreases by 1% the demand for the ...
14
votes
5answers
9k views

Productivity vs real earnings in the US — what happened ca 1974?

Somewhat related to the most recent US elections, I've been researching the whole "white working class" situation, and one strange anomaly has popped up. When one looks at a graph of productivity (...
8
votes
2answers
2k views

What would happen if the world switched to a single currency?

What would happen if all countries suddenly stopped using local currencies and adopted a global currency (like the Euro, but for everyone)?
27
votes
4answers
4k views

From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
17
votes
6answers
629 views

Experiments contradicting the expected utility model

This is a question I asked on the cognitive science beta which never got any answer there. I do not know what the policy should be for question migration/reposting (maybe worth discussing in the meta?)...
15
votes
5answers
8k views

Applications of Trig functions in Economics?

Are there any applications of trig functions (ie $\sin(x)$, $\cos(x)$,$\tan(x)$) in economics?
9
votes
3answers
4k views

Can the stock market show indefinite exponential growth?

In a comments on a question on money.SE, the following dialog took place: Eventually there will not be enough matter to represent all the money, so we know for certain that the answer is "No" for a ...
6
votes
1answer
922 views

Interest rate parity: Counter intuitive

What is the basis for interest rate parity to hold? I know, the reason stated is excess returns Excess returns as such should not be the reason for a currency depreciation. for e.g. when we posit ...
11
votes
1answer
489 views

Are there fundamental reasons why (exponential) economic growth is highly desirable?

One of the most widely published measures of the economy is the economic growth as a % of the GDP; i.e. the degree to which an economy grows exponentially. In my understanding, when the rate of ...
9
votes
1answer
15k views

Finding demand function given a utility min(x,y) function

I am confused about a particular point regarding finding a demand function. All the problems in this practice set I am doing have involved applying the method of Lagrangian multipliers. But I am ...
4
votes
1answer
566 views

Optimization problem with Kuhn-Tucker conditions

Consider a game with two players where each player $i=1,2$ has preferences $u_i=s_i^a c_i^{1−a}$, where $c_i$ is consumption and $s_i$ is social interaction. $s_i$ is given by $s_i=t_i+t_{ij}\times t_{...
-1
votes
2answers
190 views

What amount of Quantitative Easing will cause hyperinflation?

You all know that Quantitative Easing shifts the LM and AD curves right, so I haven't taken the time to redraw this picture. What's the maximum amount of Quantitative Easing that the Federal Reserve ...
4
votes
2answers
14k views

Does GDP count both the investment and the house rental?

Suppose you bought a new house in the year of 2010. Then the price of the house in counted toward the 2010 GDP. Say then you live in the new house in the following years. So in these years, the GDP ...
1
vote
3answers
340 views

Is it possible that the minimum point of a short run cost curve does not touch the long run cost curve?

In the answer to this question, the answerer said "the minimum point of a short run cost curve will be above the long run cost curve". Is it true? If so, how would it be so? I thought that if e.g. ...
17
votes
3answers
809 views

Destroying the dollar

Let's destroy the USD dollar: I am the government of a small, economically and geopolitically unimportant country that has its own currency and a local central bank. I order the local central bank (at ...
7
votes
5answers
1k views

How is the interest on fractional reserve money creation paid?

In fractional reserve banking commercial banks create money when they make loans. When these loans are paid back the account is zeroed, the created money disappears, but the bank is still entitled ...
11
votes
2answers
1k views

Inflation and economic growth

Noticeable works about the impact of inflation on economic growth are dated back to the 90s. For example, Barro (1995): the impact effects from an increase in average inflation by 10 percentage ...
8
votes
2answers
533 views

Ricardo's theory of comparative advantage

The aim of this question is to better explore the mathematical economics model behind Ricardo's theory of comparative advantage and the claims that can be made based on this model. This seems ...
7
votes
2answers
9k views

Consumer surplus in case of perfectly inelastic demand

How do we define consumer surplus in the case of perfectly inelastic demand? This question was inspired by the comments following this answer. For a graph of inelastic demand please also see the ...
7
votes
3answers
264 views

How does a central bank create the money used for quantitative easing or lowering the value of their currency?

Up until last week, the Swiss central bank used Francs to buy Euros, in an effort to lower the value of the Franc; today the European central bank announced that it would use Euros to buy bonds in ...
13
votes
4answers
77k views

What is the definition of exogenous and endogenous preferences?

Wikipedia states: Exogenous Preference -- one that comes from outside the model and is unexplained by the model. Endogenous Preference -- preferences then cannot be taken as given, but are affected ...
11
votes
2answers
444 views

The Case for Basic Income in developed and underdeveloped countries

From what I can tell, the idea of the basic income guarantee is very popular in some circles as an excellent alternative to a lot of modern welfare systems. Has anybody developed a theoretic or ...
11
votes
2answers
34k views

Marshallian Demand for Cobb-Douglas

When trying maximize the utility having a cobb-douglas utility function $u=x_1^ax_2^b$, with $a+b = 1$, I found the following formulas (Wikipedia: Marshallian Demand): $x_1 = \frac{am}{p_1}\\ x_2 = \...
2
votes
1answer
999 views

When action and strategy differ in game theory

It looks like in a static, simultaneous move game, action is used interchangeably with strategy. But when do they differ, say in a more complicated game structure? I am trying to understand the ...
4
votes
2answers
1k views

Why is modest inflation a good thing? [duplicate]

I have been reading a BBC news article about inflation in the UK, which is saying that inflation has recently become negative (http://www.bbc.co.uk/news/business-33147660). The article suggests that ...
2
votes
2answers
140 views

How is the Corona $2 trilion stimulus package going to be financed?

Perhaps this is a simple question but as a non-US citizen I don't understand how the US government is going to finance the $2 trillion stimulus package to combat the economic damage due to the Corona ...
0
votes
1answer
66 views

What does the Fed do with their profits?

As far as I understand the system the Fed prints money which it then uses to buy bonds. Bonds are basically statements of debt meaning that the Fed receives interest from the parties it has bought the ...
23
votes
6answers
2k views

Who exactly foots the bill if Greece defaults

Apologies if the topic is not appropriate (economics newbie here) but I am curious as to who exactly would foot the bill if Greece defaults on the ~300 billion dollars it owes. It looks like most of ...
0
votes
1answer
50 views

How does investment have a negative impact on the current account (trade balance)?

NX ≡ (S-I) + (T-G) Read this as “the trade balance (net exports) is identical to the sum of net savings (savings minus investment) and the government’s ...
23
votes
2answers
3k views

Should we expect more structural technological unemployment if growth becomes more limited by natural resources and less by labour?

Technological unemployment, where unemployment arises from (with some oversimplification) workers being replaced by machines, has so far been temporary as new jobs were created that replaced the old ...
21
votes
5answers
4k views

Where to start learning economics as a mathematician?

I study pure mathematics at university and I'm looking to get into economics, with pretty much no background knowledge about it. Are there good sources to learn from with a decent mathematical ...
6
votes
5answers
2k views

Book recommendations on empirical methods in economic research and econometrics?

This question is more so geared toward anyone with research experience within economics, though of course, anyone is welcome to respond. I'm an undergraduate math major with a minor in economics. I'...
25
votes
4answers
5k views

Why do people buy negative interest rate bonds?

I get that people buy long term government bonds, because of how safe it is, and if there would be a recession the government would just print more money and could pay it back. But why would anyone ...
12
votes
2answers
2k views

What is the difference between “aggregation” and a “representative agent?”

What is the difference between "aggregation" and a "representative agent?" I'm sorry if I'm not entirely clear on this question, but that's why I ask. It seems to me as if a representative agent is ...
10
votes
5answers
1k views

What are the arguments against the rational expectations hypothesis?

I believe the rational expectations hypothesis says that agents in a model bear expectations that are the same as mathematical expectations. Under what circumstances does this hypothesis become ...
15
votes
3answers
809 views

The Economics of Coronavirus

People are concerned about the economic impacts of the virus. How severe will the economic downturn be? Will the coronavirus cause a global recession worse than the 2008 crisis? I'm not looking here ...

15 30 50 per page
1
2 3 4 5
18