- At the equilibrium quantity how much annual revenue do the producers receive?
20 $ per crate of oranges
- If the government imposes a price floor of $30 per crate how much revenue will producers now receive?
(80 million crates x30 $) = 2,400 $ million
- Discuss whether producers are necessarily better off.
The producers are not better off because when the prices for the oranges is low, many customers demand for them and this would result to extreme losses. On the other hand, when the price for the oranges is high, few customers are capable of buying them although ...
Inflation College Essays Samples For Students
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- At the equilibrium quantity how much annual revenue do the producers receive?
- Introduction and thesis for the topic
- The extent of grade inflation, which defines how far grade inflation has been witnessed in the world.
- What or who have been the agents of grade inflation
- Effects or the results of the extremely favorable examination system
Lecturers or professors of previous times cannot clearly tell what has befallen university education. They are in exclusive doubt as we are concerning the extent to which grading have changed in Universities and colleges. To them, it is either the exams have become extremely easy, or the current examiners test the teachers ...
The use and interpretation of economic policies are fundamental to the formulation of strategic plans and courses of action. Economists and policy makers play a vital role in executing this important analytic and interpretive task. Keynesian and monetary schools of thoughts are some of the important alternatives applied in making economic decisions.
Monetarists believe that government involvement in controlling the level of aggregate demand in the economy is counterproductive in the long run. In its stead, they propose that the best way the government can control unemployment and inflation levels is by the use of monetary policies. Monetary policies ...
Gross Domestic Product:
Gross Domestic Product, usually abbreviated as ‘GDP’ is the total amount of goods and services produced in an economy during a given period of time. GDP is also one of the popular economic data source, used for the purpose of future forecasting of economic trends in a nation. Apart from future forecasting, GDP is also used to compare growth between two or more nations. For Instance, if during 2013, GDP of Canada is 5.6% and of United States is 6%, this indicates that the US economy has higher growth.
Real Gross Domestic Product:
Real GDP is a macro-economic measurement indicator, which accounts for ...
In economics, inflation can be explained as a persistent increase in the general price level of goods and services over a period of time. Inflation results in a reduction in the purchasing power per unit of money which means money losses it’s real value over period of time. The inflation rate is measured by inflation index . Inflation index shows the change in percents of general price index also called consumer price index over the period of time. (Mankiw, 2002).
There are described three types of inflation:
1. Demand-pull inflation which is caused by increases in aggregate demand due to increased private and government spending;
Ecuador is a democratic nation found in South America. It has neighbors such as Colombia to the north, Peru to the east and south and the Pacific Ocean to the west. The economy of this country is reliant mainly on the exports of bananas, oil, gold and shrimps. The main economic activities of the people of this nation are farming and mining. It is the largest exporter bananas in the world. Most of the shrimps are also exported to major world markets especially in Europe. The country practices presidential system of democracy where the president is the head of ...
Various studies have proved that macro-economy factors have a significant impact on health care costs and the same is explained hereunder:
Impact of Inflation:
Evil effects of inflation can also be experienced in health care sector. High inflation rate in health care sectors have subsequently increased the health care cost. For instance, cost of modern medicines is not affordable to most households in lower income and middle income counties. According to a study, around 20-30% of households are forced to sell their assets to cover up their health care expenses.
Impact of Exchange Rates:
Flexible Exchange Rates directly affects the price of imported vaccines, equipment and ...
The term “interest rate” is one of the most widespread in the present financial sphere. There are several types of this index, and the differences between those are usually based on the fixed set of economic factors.
The nominal interest rate is the percentage growth of funds that creditors take from borrowers for their services (using borrowed money). The nominal interest rate is the basic type of interest rate, and is the stated rate on a given bond or loan. In essence, the nominal interest rate is the actual price that borrowers pay to creditors to use their money. ...
In labor economics, full employment embodies a situation where any available labor resources are efficiently utilized in the economy. It is the level of unemployment just above 0% that is acceptable. At this level, cyclical and demand deficient unemployment do not arise, hence very low unemployment rates. In the US, full employment has not been reached as some labor, or skilled people in the US are still jobless. Currently, unemployment rate in the US stands at 5.9% as at September 2014 (BLS, 1).
Frictional unemployment occurs when labor moves from one sector to another. Workers sometimes change jobs and ...
Inflation in Economics
Research Question: What are the effects of the inflation in economics and how can we control it?
Aim: The aim of this paper is to discuss the effects of inflation, both the advantages and disadvantages in the global economy.
Introduction elements (think of two hooks and choose one later)
Hook 1: Inflation in the economy has resulted in losses and business falling due to prices of goods and services falling (Arnold, 2010).
Hook 2: Inflation in economics has been a matter of discussion for centuries, and even currently it is further analyzed with the same interest.
Connecting information to thesis:
Point 1: What is inflation?
Point 2: How inflation is measured
Point 3: ...
Few decades back, A W Phillips proposed the notion of nominal income inflation against joblessness in the UK and established the stable and potential unfavorable association over the preceding decade . This scenario invented the Phillips curve. The findings of Phillips after twenty years, Thomas Sargent and Robert Lucas proposed the joblessness of the period 1970s and greater inflation concurrently against a Phillips curve background and criticized the unsuccessful econometric attitude on an extended scale. The Phillips curve showed positive behavior in the macroeconomic assessment. The sensitive econometric researches in the United States located a constant and managed association between ...
Analysis of the current macroeconomic situation
Macroeconomic analysis entails the study of the behavior of the aggregate economic phenomena that include economy growth rate, inflation, price levels, gross domestic product, national income and the unemployment levels. Currently, the utmost concern of the US government is on the high unemployment levels. Dating back from the great recession, the labour conditions have been deteriorating where the unemployment rates increased from 5% in the last quarter of 2007 to 10% in the final quarter of 2009 (Katz, 2014). In early 2012, the rate was at 8.3% but ended at 7.8 %, and the declining trend has been seen with ...
American Public University
The global financial crisis started in 2008 opened a new era for the economy managers in the developing countries and the United States. Using the conventional tools and strategies to cope with the financial crisis will not create the desired results anymore. This new experience indicates us that the economy managers and the governments need to develop more complex and detailed strategies to overcome the issues in the economies. The Federal Reserve is one of the responsible institutions for the economy management. The FED has always been blamed for not developing a proper response against the economic and ...
Difference between Nominal & Real GDP:
Nominal GDP is that when the values haven’t been adjusted for inflation.
Real GDP: Real Values are the ones which are adjusted for inflation..
GDP an accurate or inaccurate reflection of productivity:
GDP doesn’t truly reflect a country’s productivity because:
- In developing countries especially and some of the developed countries GDP is underreported, due to the existence of black markets that is illegal sale and purchase of goods and services.
- In Rural areas, a high proportion of income is generated for self-consumption that is for, e.g., the farmers if produce agricultural products they would consume most of it themselves, and their income ...
Economy experiences macroeconomic fluctuations over time that affects economic growth. The aggregate output, consumption, investment, net export, and employment may tend to grow over time but then drop suddenly. Economists continue to discern the current condition of the economy and where it is heading so that they can effectively deal with future economic events. Macroeconomic fluctuations mainly involve changes that occur in the demand-side of the economy, which determine the gross domestic product.
Gross domestic product is never constant, but change due to many reasons like changes in government policies mainly in interest rates ...
This paper explores the main macroeconomic indicators and gives the overall assessment of U.S. economy. We have overviewed the U.S. GDP growth, the rate of inflation and unemployment rate. We have identified the U.S. economy’s stage of business cycle. Based on the analyzed data, we have suggested the possible fiscal and monetary decisions that can facilitate economic revival. We have examined the main factors that can improve net trade balance. We have prepared the economic forecast for the following year based on the decisions made in terms of fiscal, monetary and trade policies.
Keywords: GDP, macroeconomic, inflation, unemployment, ...
Monetary policies denotes the actions taken by the central bank (Federal Reserve) in a bid to influence money availability in the economy with the aim of achieving the nation’s economic goals. Performance of the monetary policy mandate was given to the Fed when the Federal Reserve Act (1913) came into place. The tools used by the Fed to perform the monetary policy obligations include the reserve requirements, open market operations and the discount rate. In order to perform the roles effectively, they are divided in that the board of governors are charged with overseeing the reserve requirement while ...
Graph description. Aggregate demand and aggregate supply curves show how much goods and services national economy can purchase and produce at various prices and within a specific time frame. The point of macro equilibrium is the level of price and output, at which aggregate demand matches aggregate supply. Under the ceteris paribus assumption, the economy will always go back to the state of macro equilibrium. However, in the short-run changes in the economy are not immediately followed by a change in the supply-demand pattern. That leads to surpluses or shortages of products and services that make the economy less ...
Question 1. Explain the two theories of aggregate supply. On what market imperfection does each theory rely? What do the theories have in common?
Sticky-price theory: price for the goods on the market do not change immediately to different occasions that might influence this changes. The goods on the market can’t be out bought instantly. Some firms respond to this by reducing the number of products, instead of price reduction. They do that, because they want to evade profit loss.
Imperfect information theory: this theory purpose is to model the relationship between changes in the money supply, prices ...
Inflation is a general rise in commodity prices. Inflation affects traditional profitability measures since such measures ignore the time value of money. Traditional measures are constrained by the fact that initial costs are valued at the historical value while cash flows or benefits are valued at current prices. In periods of inflation, traditional profitability measures will be misleading.
Cash on cash return is given by the ratio of after-tax cash flow and equity investment. It is commonly used in evaluating real estate investments. The ratio gives the amount of money a project generates for every unit of equity invested ...
The high unemployment in USA is attributed mostly to cyclical causes rather than structural causes. The natural rate of unemployment is defined as the level of unemployment at which the inflation rate is constant. From the early years up to the year 1969, it was believed that the increase or decrease in the rate of unemployment affected the rate of inflation at all times. Under the Philip’s Curve, an increase in the rate of unemployment resulted in the decrease of the inflation rate. On the other hand, a decrease in the rate of unemployment resulted in the increase ...
The Keynesian economics school has invented the aggregate demand (AD) and aggregate supply (AS) model to explain the macroeconomic equilibrium in the economies. The model is based on two main macroeconomic variables those are the explanatory variables of AS and AD: 1) price level in the economy and 2) real output in the same economy. In this essay, I will explain what AS and AD includes, and how the economy works at the macroeconomic level.
Graph 1: AS and AD model in Graph
Aggregate supply (AS) includes the information of the total production level in an economy depending on the price level. In the short run, AS ...
Published on: October 22, 2014
The tax cut policy followed by Kansas has led to a shortfall in the revenue this year. The tax revenue collected in the fiscal year 2014 was $700 million less than that of the previous year. According to the director of taxation Steve Slotts, this revenue shortfall is temporary in nature. This temporary deficit is being met through the expenditures from the reserve fund. But the revenue shortfall in the first three months of the fiscal year 2015 that began in July 2014, suggests that this shortfall is permanent. The ...
Fixed Income Securities: Basic Concepts
When a bond trades between two coupon dates, the seller is entitled to receive any interest earned from the previous coupon date through the date of the sale. This differential amount is known as accrued interests and is payable by the buyer(new owner) of bond.
Clean Price is the price of the coupon bond which the buyer(new owner) of the bond has to pay excluding any accrued interest amount.
Dirty Price is the price of the coupon bond which the buyer(new owner) of the bond has to pay and includes accrued interest on the ...
The budget of the country or an organization is the difference between the money the country receives and the money it spends. The budget of a country reflects the country’s financial status. Budget review is the process of evaluating and assessing budget so that it can articulate with the current economic reality of the country (Mayer, 2002). This essay is a summary of a budget simulation exercise that I conducted. The aim of the budget simulation exercise was to examine whether one is capable of stabilizing the national budget at 60% of the GDP.
CHOICES and REASONS
- Reduce troop levels ...
1. What is the "current macroeconomic situation" in the U.S.?
The current macroeconomic situation in the United States has lots of positives and negatives. The positive aspects start with the normal tendency of the economic situation to expand. The country has an increasingly growing employment group as well as persistent capital formation and improvement in technology. Most significantly, the country has lots of entrepreneurs that are attempting to establish greater value on their products and services at a lower cost. During the first quarter of 2014, the real GDP in US came in with only 0.1 percent ...
Gross Domestic Product (GDP) is composed of consumption of goods and services by the public, investments into the production of these goods and services, the net imports which is accounted for by the difference between what the country imports and what the country exports, and what the government spends. In the diagram shown above, GDP is the summation of all the activities of households, government and business. GDP is measured yearly so to understand if the economy is improving or not, experts (economists) measure GDP as a percentage change from the previous year. The measurement is affected by time ...
GDP and CPI
In economics literature, the term nominal refers to an unadjusted rate or value. In other words, the nominal value rate or value reflects the current situation such as current level of food prices without making any adjustment to inflationary levels or other associated factors. On the other hand, the term real measures the adjusted nominal value so as to present a more accurate representation of the economic value by removing the effects of general price levels over time. Below is the relationship between real and nominal values:
Rreal = RNominal – E(Inflation)
In most of the case of ...
Output gap is defined as the difference in the country’s actual gross domestic product and the country’s potential gross domestic product. During recession periods, the output of products and services also declines. On the other hand, when the economy of the country is in good condition, gross domestic product also increases. In an output gap, the potential output pertains to the maximum amount of services and products an economy can have when it is efficient of in its full capacity. Output gap can either be positive or negative. A positive output gap happens when actual ...
Topics discussed in the article
- Economic growth
- Monetary policy
Mixed economies are the susceptible victims of global economic instability especially due interaction of currencies through trade. Any country that participates in external trade of goods and services is prone to the adverse effects of currency fluctuations or global recession. During the semester, we have been studying about the interactions of global economies and how they influence the performance of macroeconomic indicators. More specifically, we have been analyzing the global impact of exports and imports trade on the inflation rate and the countries’ economic growth.
The major topic that we discussed ...
Answer 6(Spot rate and Forward Rate)
The spot rate is defined as the current exchange rate. On the other hand, a forward rate is the rate that is agreed by both the buyers and the sellers to be applied in the future in forward transactions. Currency movements do not affect the forward rate. The main relationship between the forward rate and the spot rate lies in the calculation of the rate. The forward rate is calculated by either adding or subtracting a premium or discount from the spot rate. The premium or discount arises as a result of the discrepancies between the interest rates of ...
Hyperinflation is considered to be the greatest economic problem as it can change production and society. In the early 90s, it had become widespread all over the world when inflation got out of control: prices and wages increased by several times, foreign investments decreased or almost evaporated as financial risks were too high. In the early 1920s Germany suffered the most from hyperinflation as 1923 prices there increased a thousand times (Kosares, n.d.). This writing analyzes inflation in Germany following World War I, examines the recovery tools and discusses the factors that have lead the country’s economy to ...
1. Current U.S. Unemployment and Low Wage Rate
In the economy of the United States, the rise in wage rate is less, but unemployment is becoming high in the labor force.
Explanation in the light of Economic Concepts and Theories
Considering the article Yellen Sees Muted Inflation as Unemployment Curbs Wages from Bloomberg Businessweek, written by Jeff Kearns, The long term unemployment is constantly dominating the economy of the United States, due to which the people are facing difficulties in order to enter the job market, and this rise in unemployment is exerting downward pressure on the wages. People have to work on the lower wages due to ...
INDIVIDUAL STUDENT ESSAY
Module Code: MC5057
List of figures II
1 Introduction 5
2 Decision to Internationalise 7
2.1 Nine Strategic Windows 8
2.2 SWOT Analysis 9
3 Decision-Making for Entering a Foreign Market 13
3.1.1 Gross Domestic Product13
3.1.2 Restrictions for Saccharin14
3.3.1 Gross Domestic Product14
3.3.2 Restrictions for Saccharin15
3.3.3. Inflation Rate15
3.3.4 Political Stability15
3.3 United States of America16
3.3.1 Gross Domestic Product16
3.3.2 Restrictions for Saccharin16
3.3.3 Inflation Rate16
3.3.4 Political Stability16
3.4.1 Gross Domestic Product16
3.4.2 Restrictions for Saccharin16
3.4.3 Inflation Rate16
3.4.4 Political Stability17
3.5 North Korea17
3.5.1 Gross Domestic Product17
It is of common knowledge that social security, one of the most persistent and politically significant governance policies of President Franklin D. Roosevelt, is facing long run solvency problems. Policy makers are extensively acknowledging the crisis of social security system and are analytically assessing these problems along with proposing plausible solutions. This system holds an immense importance in the income structure of various economies.
As per a book written by Break (1977), the biggest threats to the social security system are demographic changes, inflation and double inflation adjustments. The demographic changes highlights the falling birthrate, which means that fewer ...
There is an optimistic view that European countries have fully recovered from inflation. Recent statistics indicate that the economies of different European countries are extremely weak, and the euro zone could soon experience deflation. In the previous month, 18 countries within the European zone was approximately 0.7 percent, which was a drop from the 0.8 percent in December. This was extremely lower than the European Central Bank’s inflation target of below 2 percent. Deflation is an extremely critical economic element that aims at ensuring that an economy stands after a long struggle. When there are extreme fall in ...
Inflation can be explained as a consistent rise in prices of goods and services. Inflation affects the demand for money, exchange rates, and prices of goods and services. It reduces the value of domestic currency and alters the composition of a local currency (Madura, 2005). Reduced value of domestic currency affects an economy’s transaction ability in the international frontier. It implies investing much in a foreign state, but low levels of returns.
With inflation, a country’s exports become less appealing to international traders. This implies fewer sales for local and international investors that create a trade deficit. ...
Inflation and Oil Prices
Inflation refers to persistent increase in the price level over time and is one of the most dangerous threats to an economy because if unchecked it will erode the purchasing power of a currency and if the monetary system of the country is destroyed, can ultimately force the individuals to adopt foreign currency.
There are two kinds of Inflation: Demand Pull and Cost Push Inflation.
Cost Push Inflation: A situation when inflation persists in the economy because of initial decrease in aggregate suppky caused by an increase in the real price of an important factor of production i.e wages and energy. Oil Crisis of 1970 is a suitable example of cost-push( ...
The article talks about how US monitory policy is related to the Federal Reserve lending rate. The Federal Reserve has the mandate to regulate circulation cash in the public hands. By doing so, the country is able to achieve; stabilizing prices, standardize long-term interest rates, creating employment opportunities and attain general economic growth. The Articles shades the challenges arise for policy makers while balancing the objectives. When the central bank stabilizes prices for a long time, items, goods, services, and labor prices remain unwaged by inflation. While this paves a prosperous economy, it too indicates efficient resources allocation hence ...
The implementation of macroeconomic policies is done to achieve the government’s main aim of full employment and a stable economy through low inflation. The Phillips curve is an important tool in studying the relationship between these two parameters in an economy
Inflation is occasioned by an increase in the average price of goods and services over time, while unemployment is the condition where someone actively seeks a job but gets none despite their willingness to accept the market wage rates on offer at the time.
Philips, by analyzing unemployment data changes in the UK, observed that a stable ...
First of all I must say, that I don’t agree with the statement, that inflation is more dangerous than unemployment just because the last is only a problem for those who have no work. The high level of unemployment is also dangerous for all society, and I will explain this in my essay.
As you know, the situation in the labor market in the U.S. and other developed countries are not improving. In America, the unemployment rate (9.5 %) has the potential to fall over 10% . ...
Inflation in the United States
Before the Second World War, the price level in the U.S. has been relatively stable, with the exception of episodes of hyperinflation associated with the financing of the U.S. War of Independence (1775-1783) and the Civil War (1861-1865). Typical were also periods of negative inflation (deflation) during the economic crisis, in particular 1840-x, 1870-x, the Great Depression. After the Second World War has been a steady increase in the price index. The period of significant inflation lasted from 1973 until the early 1980s. Usually it is associated with an oil embargo by OPEC countries. ...
China with an official name as People Republic of China (PRC) is a country located in East of Asia. It is known as the most populous country of the world with population of more than 1.35 million. The company has a Gross Domestic Product amounting to US$ 8.227 trillion in the fiscal year 2012 with per capita income of US$ 6,076. The country did a fantastic job even at the time of economic crisis (China Economic Outlook, 2008-2012). The comparison of the economic indicators would be associated with the economic indicators of ...
a) Find the U.S. inflation rates between 2002 and 2007 from the IMF website and calculate the Purchasing Power Parity (PPP) exchange rates for Countries A, B, C and D in the case study. (The inflation rate in each country in the case can be calculated from the Consumer Price Index. For Example: inflation rate for country A=14.7%= 132.9 – 115.9 /115.9
b) Did Purchasing Power Parity theory hold in these countries? Which currencies are over- or under-valued against the US dollar?
c) Find the U.S. dollar lending rates (prime rate) between 2002 and 2007 ...
Macroeconomic policy is one of the critical and big picture of the entire economic performance of a nation. Every government, whether developing or developed develop their macroeconomic policies to particularly use them to influence the economy. The macroeconomic tools used to bring stability on various economic components include monetary policy and fiscal policy. United Kingdom is one of the developed nations in the world, and developing its overall macroeconomic policy of the developed country calls for a critical understanding of the state of the economy. Macroeconomic policy focuses at economic growth, low inflation, as well as low unemployment. The ...
Good Performance of the economy influences the success of the stock markets. If the economy performs poorly, stock markets will decline leading to decline in prices of shares traded in the stock exchange markets. Operation of stock markets is usually governed by various economic stock agents who use economic indicators in forecasting the future trends in the stock exchange. These economic agents are mainly stock investors and their activities in the stock markets are a major determiner of the direction the market takes. They influence these activities by use of all available information determining the performance of the economy. ...
The Golden Age (Long Boom) was an absolutely unique period in West European economic history. During this time period of about 25 years that followed the end of the Second World War, countries of the West Europe expanded their economies at the unseen before rates of at least 5 % GNP increase per annum, which nearly doubled the previously recorded rates of growth. What is more significant, is that this economic growth was also accompanied by the equally strong increase in employment, which made possible for the European countries to experience a state of practically full employment and thus almost ...
Expansionary monetary policy.3
Contractionary monetary policy3
Australian monetary policy3
Objectives of Australian monetary policy.4
Australian Monetary policy framework4
The decision process in monetary policy...5
Monetary policy implementation in Australia5
Transmission of Monetary policy to Australian economy.6
The monetary policy is a policy that is used by the monetary authority of a given country to control the money supply in the economy. This policy frequently targets a certain interest rate with an objective of promoting economic stability and growth in an economy. The official goals normally include relatively low unemployment and stable prices. This policy can either be expansionary or contractionary.
Expansionary monetary policy
Gross Domestic Product (GDP).
GDP is a representation of the total value of all goods and services produced in an economy during a given year. It is a gauge used in assessing the health of an economy in comparison to previous quarterly reports (Frumkin, 2006). Measuring GDP involves two methods, which logically should arrive at the same totals. The methods used in measuring GDP are; income and expenditure approach. The income approach sums up gross profits for all incorporated and incorporated companies, total employee compensations, taxes and less any government subsidies. The expenditure method, on the other hand, sums up total investments to ...
Inflation targeting and Interest rate targeting are two primary and most popular monetary policies across the globe today. Inflation targeting can be defined as a central bank policy that revolves around meeting and adhering to preset and publicly displayed targets for the annual rate of inflation (investopedia 2013). The benchmark used for inflation targeting varies from country to country but is some form of price index of a variety of consumer goods. Most commonly this benchmark is Consumer Price Index (CPI). While Interest rate targeting as a monetary policy regulates and checks the interest rate charged by one depository ...
Microeconomics deals with individual firms and units’ decision making in an economy while macroeconomics addresses the greater national aspects. In that respect, this analysis seeks to demonstrate the functioning of both microeconomics as well as macroeconomics concepts by analyzing two current issues in the US addressed in two articles or the news and touching on such concepts. This is achieved by the analysis first explaining the problem as presented in the article and its possible causes. The analysis further explains the significance of the issue and its possible cause of economic fluctuations as well as its effect including benefits ...
The paper discusses the evolution of the U.S. inflation in the near and medium terms bases on historic inflation trends in the U.S. and countries that have experienced inflation in the past. Findings from the research attempts to evaluate the view that stable long-term inflation expectations and downward rigidity in wages provide adequate cushion to prices to evade further declines in inflation.
The aim of the article is to evaluate the view that past and recent inflation trends can help predict future changes to inflation. The authors of the article take a case study of the United States by ...
An economy actually consists of economic system of a particular country or any other area that is, the capital, labor, and land resources. A certain economy is said to be the result of process which involves its history, technological evolution, and social organization, in addition to the area’s natural resource endowment, geography, and ecology as the key factors. Monetary policy is essentially the economic tool that is used in the economy to control the money supply with an objective of promoting the desired economic growth and stability within that economy. Monopolies are a form of market structure where ...
Inflation and Deflation – Definitions
Inflation can be described as an upward increase in the average prices of goods and services (Satija 358). On the other hand, the term deflation refers to the phenomenon of falling of average prices of goods and services. In other words, deflation occurs when the prices of commodities fall and the value of money rises (Satija 357). It is worth-mentioning that price stability is the boundary between deflation and inflation (Satija 358). Both the mentioned phenomena are said to inflict extremely harmful impacts on the economic performance of a country as they ...
Q1. Explain the two theories of aggregate supply. On what market imperfection does each theory rely? What do the theories have in common?
Answer: The two theories of aggregate supply are explained as follows.
Sticky price model: The model suggests that firms do not immediately change the prices in response to the change in market demand. The prices are also set by agreements between firms and customers. The market imperfection is that prices usually in goods market do not regulate with changes in demand. Sometimes even with the fall in demand, some firms reduce output rather than the prices.
Imperfect information model: This model assumes that prices adjust ...
Inflation on the Sterling Pound and Its Impact on Tesco
Recently, the term inflation has become very common in economics as almost every country and society in the world was hit by an increase in the general prices of goods and services over the last four years. Inflation is the term used to refer to this general rise in the cost of living over a given period, which is usually a shorter time than expected in an ideal economy (Boyes, W. J., and Melvin, 2010). In addition, inflation implies that the currency at that ...
As the world keeps changing, the needs of people also change. This means that the way investments are done in the new world should also change so as to meet the global portfolio. The risk analysis determines the global portfolio that most of the investors are putting along during their investment (Tung, 2014 p.102). Asset allocation such as mix of bonds, money market account, and real estates are some of the example of how investments are done in the new world. Before making any investment, it will be crucial if one conducts the personal risk analysis and then compare ...
THE AMERICAN ECONOMY IN 2014
Why the Inflation Rate is increasing? 3
Economic Policy Suggestions 5
The American Economy in 2014
The American Economy has started recovering from the financial crisis began in 2008. The GDP is increasing at the average rate of 3% annually. Even though, the American Economy did not confirm a full recovery, it looks like that a new balance in the economy is developed.
Graph 1: GDP Growth
In the nominal numbers, the American Economy is producing again; however, the real values of the GDP indicate us that the Economy is not fully recovered. The private sector ...
The actions taken by the Reserve Bank of Australia to influence the cost and supply of money in the economy are referred to as the monetary policy. The main tools through which the monetary policy influences the market operations is the interest rate that is paid on the loans from the money market. Manipulating the interest rate is the main tool of RBA to influence its monetary policy. RBA is the central bank of Australia; and it is the role of the central bank to ensure price stability by controlling the supply of money. So, a stabilizing role is ...
The paper focuses on the role of commercial banks in the economic revival of transition economies. It explains the transition economy as economy changing from a centrally planned to free market economy. This exposed the economies of these countries to a trading environment for which they were wholly unprepared and which seriously affected their economy. The economy of these countries experienced severe short-term challenges and long-term constraints on their development. Similarly, the employment and inflation increased gradually in these countries. However, the commercial banks managed to finance the viable enterprises, advise the managers, and liquidate non-viable enterprises that managed ...