|
|
Enron Mail |
A classmate wrote...
< < 1. From the F.T. 11/9/99 p. 29: Why will the ECB's interest rate increase < make it "...harder for the [Italian] government to reduce its enormous public < debt" ? One element of net taxes is the transfer = interest payments on the public debt. Higher i raises interest payments and, thus, the goverment budget deficit (G-T). < < 2. from the same article, why will the rate increase "...put pressure < on Italian companies with high exposure to short-term loans" ? Same logic: Short-term loans need to be refinanced regularly (unlike long-term fixed-rate bonds). If I have loans that need to be refinanced, their refinanced rate will be roughly 1/2 point higher this month than last due to the actions of the ECB. Another classmate asked... <The senate plans to raise the minimum wage by $1 an hour over the next 3 years. Based on what we learnt in class, a wage hike would tend to typically go to teenagers and not to primary bread-winners. Lots of min. wage workers are teens, but roughly 40% are low-income heads of households. <Also, since a wage hike attracts more workers and <creates excess labor supply, businesses lay off workers rather than raise <their pay - this creates more unemployment. Turnover is high in low-wage jobs, so employment might fall, but not due to many layoffs -- just lower hiring. The point remains that employment still declines. Most estimates are that the employment declines are quite small, so that low-wage workers on average come out ahead with the rise. David I. Levine Associate professor Haas School of Business ph: 510/642-1697 University of California fax: 510/643-1420 Berkeley CA 94720-1900 email: levine@haas.berkeley.edu http://web.haas.berkeley.edu/www/levine/
|