ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an increase in the period required for training the industry’s workers
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an increase in the regulations affecting businesses
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an increase in the subsidies for that good
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an increase in the taxation of that good
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Detailed explanation-1: -Higher interest rates increase the cost of borrowing, reduce disposable income and therefore limit the growth in consumer spending.
Detailed explanation-2: -What is the most likely reason why government intervention may make the situation worse? A Government decisions can take a long time to have an effect.
Detailed explanation-3: -The government provides certain public goods and services which the private sector fails to provide because there exists no market for them. Example: National Defence, Public Parks and National Highways etc. The reason of government providing such goods is the nature of public goods.
Detailed explanation-4: -Interest rates – higher interest rates make saving more attractive. Economic growth – high growth and high consumer confidence encourage relatively higher spending and a fall in the savings ratio. The age of individuals – People in their 40s and 50s tend to save for retirement. Old people run savings down.