Macro and micro economics Essay Example | Topics and Well Written Essays - 1500 words

Macro and micro economics - Essay ExampleThough, this is just a rough estimation. The utility comparison has never been accurately summarized, each writer puts down their own views. all(prenominal) the views are somehow correct because they are an improved notion of the first theory. So it is correct to say, Anns utility function is turn down than peters. 2. Central tills have started raising interest rates as many economies picked up in 2010, to combat inflation. Explain the (opposite) onuss of higher interest rates and lower inflation on the budget set and welfare of house owners with a mortgage, and assess the overall effect on them. Interest rate is the amount which is charged to the drawer by the lender and it is usually expressed as a percentage. The rate changes due to inflation. On the other hand, inflation is the general rise in the prices aim of services and goods over duration of time. By increasing the interest rates, the central banks make it harder for the commerc ial banks to borrow money. By so doing the money in circulating reduces hence reducing the inflation. The inverse of this is the central bank reducing its lending rates and making it possible for more banks to borrow money. This will translate to tribe borrow more money thus increased purchasing power. To deal with mortgages it will be easier for them present to the bank. The overall effect is that the living standards of people will improve since there enough money and its take account will be okay. 3- Economics Comprehension 1 Insurance is big business in the UK. So is internet gambling? How might we explain this paradox? (Can it be explained without giving up the assumption that peoples preferences obey the von Neumann-Morgenstern axioms?) Insurance is a contract where premium is paid to the redress company to cover the happening a specific risk. Internet gambling includes any kind of activities that are transacted through the internet which choose placing of bets or a wa ger. The Von- Neumann-Morgensterns theory of utility has many assumption is one of them cosmos continuity. This is shown by a decision maker who prefers an outcome A to other outcomes B, C. in the interval of unit a number p makes the decision maker indifferent between getting outcome B and submissive A which has a probability P, probability 1-p for C in a lottery. In the UK, insurance being a big business attracts a lot of people. 4. In modern societies, not just childly goods but too uncertain prospects (such as insurance policies) are traded, sold and bought. Show how this phenomenon can be explained by differences in risk attitude between economic agents and show how Pareto-improvements can thereby be achieved. In the modern world, different methods have been established due to high rise of risks. Insurance also involves risks making its agents involve a fee charging the users of the service involving on the risks insured. An agreement between the inured and the insurer know n as the policy holder determines the claims which the insurer is legally required to pay. Risk management is great in insurance since insurance companies take over risks from customers. Risk attitude affects projects. This is because of differences in peoples attitude to risk cause conflict, and delay. This can lead to poor management of risks. Loss in insurance is depending on two variables the number of losses that will occur in a specified close and the amount of losses given that a loss has occurred. The risk attitude depends on its