About some questions on Saturday~

1.Why do European countries over-produce food and destroy it instead of giving to poor countries?
There are several reasons:
1)Costs of transfering the food
2)Some types of food are non-transferable that can not be kept for a long time.
3)The over-produced food is limited that it can just help preventing starving for a short period.
4)Local farmers may be affected by the free food from European countries for that their incentives to produce food may be reduced. Consequently,in the long run,it can make situation n the poor countries even worth.
5)It is very difficult to decide which starving country can be given the food. Sometimes,this will influence the relationship between two countries.

2.Why AD curve slopes down from left to the right?
There are several explanation for an inverse relationship between price level and aggregate demand.
1)Generally,the easiest reason we can think is about the conumption.
Real income falling: If the price level goes up,the real value of people’s incomes fall and consumers are then less able to afford UK produced goods and services.
2)Net export: International trade effect: As the price level rises, assuming no change in foreigh prices and the exchange rates, the competitiveness of domestic goods will be reduced and foreign-produced goods and services become more attractive (cheaper) in price terms, causing a fall in exports and a rise in imports. This will lead to a reduction in trade (X-M) and a contraction in aggregate demand.
3)Investment: If in the UK the price level rises, this causes an increase in the demand for money because of the inflation and a consequential rise in interest rates with a deflationary effect on the entire economy. This assumes that the central bank (in our case the Bank of England) is setting interest rates in order to meet a specified inflation target. Therefore,with the high interest rates,investment and consumption will be reduced.

I'm still thinking about other questions.......so strange!!!