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Homework answers / question archive / 1 Why does the government give so much subsidies to national universities? Please analyze it from an external perspective
1
Why does the government give so much subsidies to national universities? Please analyze it from an external perspective.
2
1-Give an overview of the studies using field experiments testing discrimination in the Swedish labor market
3
use Fisher Effect to discuss the impact of unexpected price increases on creditors and debtors.
1 National Universities are usually the institutions which are encouraged by the govt itself in order to provide subsidized top quality education for every section of the society , based on the calibre of the students.
The reason for the subsidies can be multifaceted :
To encourage the bright lot from every section : irrespective of the affordability , the govt encorages bright minds by giving them a cost effective and best quality teachers . This is achieved through the subsidies which are pumped in by the govt , compensating the high fees to staying and teachers , amongst the best environment to grow. This is an environment of equity for the deserving .
Moreover education is a social good which has positive implications in the society. An educated mass is necessary for growth and development. Hence subsidy is an investment in long run.
Prestigious institutions maintains it's standards due to attraction like low Costing education , encouraging the most bright students.
Investments in infrastructure with the changing times is key , which is funded through subsidies.
Finally , providing employment is also a key role which a govt plays. Subsidies are not just used by the Student but also the teachers , through higher pay.
2
The Swedish work force has experienced significant segment changes during the previous 60 a long time. After the second world war , Swedish turned into a nation with a movement overflow , for example there were more individuals that moved to Sweden than there were individuals emigrating. Today , more than one million of Sweden nine million occupants are foreign national. A significant challenge for Swedish government has been to give migrant labors equivalent chances to in the labor market.
Many research studies highlight that the rate of unemployed in migrant laborer remain very high then the local people. In 2006 , the joblessness rate for the local people was 4.2 percent and 10.6 percent for the migrants.
Discrimination is also seen in the recruitment and wages between the local people and immigrant population in the labor force. However many researchers argue that on the field experiments testing discrimination in the Swedish Labor Market is difficult to prove because they have found issues in the productivity as well because they found that there are cultural differences and many people immigrated are less productive.
How much of the reduces productivity is contributed by the discrimination is what many field studies find it difficult to prove.
3
Irving fisher established the relationship between nominal interest rate, real interest rate and the inflation rate. He stated that the nominal interest rate is equal to the real interest rate plus the rate of inflation. Mathematically this is represented as,
i = r + ??????
Here i = nominal interest rate
r = real interest rate
= rate of inflation
Actual equation uses the expected inflation instead of inflation rate. Since economic agent doesn't know what rate of inflation might prevail in future so they make some rational expectation about the inflation rate that might prevail in future and it is represented by e. So the equation becomes,
i = r + e.
Now let's assume that a creditor has passed a loan to a debtor. So at the time of crediting the money to debator the creditor will ask for some nominal interest rate i* which in turn will depend on the expectation made by him regarding the inflation rate since the creditors are mainly concerned regarding the real interest which they get. So let's assume creditor expects the inflation rate to be e and according to this the Fischer equation will become,
i* = r + e
By doing little manipulation we can get real interest rate r,
r = i* - e
So the real interest rate that the creditor will get and the debator will pay is equal to,
r = i* - e ------------(1)
Note one thing at the time crediting the money the i* is going to fixed and real interest rate that creditors will get and debator will pay will entirely depend on the actual rate of inflation.
And now let's see what happens to the real interest rate when there is an unexpected increase in the prices or that is the inflation. When there is an unexpected increase in prices or in turn inflation which means the actual rate of inflation that is going to prevail in the economy will be higher than the expected rate of inflation. Mathematically this will be given by,
>
e
Putting this value in the fisher equation we get,
i* = r +
r' = i* - ------------(2)
Now compare equation (1) and (2) and you see that the only difference between equation (1) and (2) is of the inflation rate. In equation (1) we have expected inflation e and in equation (2) we have actual inflation and moreover we know that,
>
e which makes the r' < r.
So the point which we need to focus on here is that the real interest rate in case of unexpected increase in prices causes the real interest rate to fall. So from the point of view of creditors the real interest rate that they will get on loan will be lower in case of unexpected inflation. And from the point of view of debators the real interest rate that they are paying will decrease.
?????The conclusion is that in case of an unexpected increase in the prices the real interest rate received by the creditors will go down which is not a good thing since the real interest is what the creditors are concerned about. And from the viewpoint of debators the decreases in the real interest rate is a good thing. So the impact of an unexpected increase in prices is negative on creditors and positive on debators.