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Please ask me questions about anything related to A-level Economics

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    I am interested in discussing Economics and also helping answer your questions. My background is in teaching Economics at the A-level.

    Regards,

    Ali
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    Can you help me get my head around both Dis/Economies of Scales. The two terms confuse me a bit.

    Thanks.
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    Hi Ali,

    Thank you for being helpful.

    Can you help me with two doubts that I have regarding liquidity preference theory?

    Firstly, Is holding money in savings account considered "hoarding" money, i.e. a "demand for liquidity"? Was Keynes referring to piggy bank holding of money when he talked about liquidity preference in his book, or did he also mean savings account? Why some books regard putting money in savings/bank accounts as holding/hoarding money? I'm confused. Wouldn't the bank be able to make loans with those balances by Fractional reserve banking so how can that be considered as hoarding money?

    Secondly, one of the criticisms about the LP theory is that, just like what Keynes critcized of the Classical Loanable funds theory, the LP theory is indeterminate - like, before to find out the interest rate you need to know national income, and then to know NY you need to know Investment level which is in turn determined by i/r. I don't understand the fuzz about this. What exactly is determinacy of an economic theory? Are they not just estimations to understand what's going on? Are economic thoeries supposed to be determinate? Is the normal demand and supply theory or the monopoly firm theory considered determinate?

    I would appreciate even if you were to spare me some clues which I can further research from. Thank you so much!

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Updated: August 14, 2012
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