Essays on Inflation

The game simulation requires the specific knowledge of macroeconomic concepts. It shows how the decisions made by Chairman of Federal Reserve System affect the general well-being of the economy. The game clearly displays the process of monetary policy and how inflation and unemployment are interconnected between each other, i.e. policies that aim at curbing unemployment may result in high inflation. Given that there is always a trade-off between inflation and unemployment. The task of Chairman is to keep both inflation and unemployment at normal rate, which is complicated by the fact that all economic conditions and events occur at the ...

Discussion Post

Discussion Topic #1 Response Gross Domestic Product computes and calculates the total value of goods and services in the market. It is the process wherein based on the discussion, total goods production are being measured in a specific period within the legal market. It is true that the goods and services being produced distributed and sold in the black market is not included in the Gross Domestic Product measurement because the output of these goods and services does not have the proper documentation that makes it included in the GDP measurement. Additionally, incomes that are produced from these products ...

Wage also known as salary is the amount of pay that an individual receives upon successful completion of a task or service. This salary that he individual gets is received as reimbursement for his or her efforts. There may be also entitled to certain benefits such as sick leaves, accommodation allowance, paid travel expenses that are known as fringe benefits.

There are basically two kinds of wages that employees are entitled to. The first is money wages also known as nominal wages that are paid to persons based on the agreement that was agreed between them and the employer ...

Kenya has depicted some interesting trends in the socioeconomic sphere, since its independence some of them are portraying consistency like urbanization and fertility rate while others like per capita income, life expectancy and official development assistance, etc. show some marked changes. Some of these changes and their reasons along with their mutual correlation are explained in the following lines.

However, in the 90s the per capita income started decreasing and with it the average life as well. The downward trend in average life is also accompanied by a decrease in income and the reasons are no different from the ...

Arab Republic of Egypt (ARE) is located in the north-east Africa and partially in Asia (Sinai). It shares borders with Israel, Palestine (Gaza Strip) to the east, Sudan to the south and Libya to the west. In the north Egypt borders the Mediterranean Sea and the Red Sea in the east. The Suez Canal (length 173 km) spread through the territory of Egypt is the shortest sea route from the Mediterranean to the Red Sea and to the Indian Ocean. Therefore the Suez Canal is an essential strategic object towards Egyptian economic prosperity. Egyptian territory is actually inhabited only ...

The overall experience of using money tree software for financial planning was profound and knowledgeable. The usage of software did not only help me recognized various factor associated with financial planning, but also the method by which effective financial planning could easily be carried out. I would describe my learning outcomes as I kept going through using the money tree software.

The first thing that appealed me was its user-friendly interference. The software has been designed in such a way as, every person related to finance, whether novice or professional could use this software without any adversity or predicament. ...

THE UNITED STATES FEDERAL RESERVE SYSTEM

The Federal Reserve is the central bank of the United States of America (Federal Reserve System, 2013). It is governed by a board of directors appointed by the president, whose main responsibility is the determination of the monetary policy through the manipulation of the various monetary tools (Federal Reserve Board, 2013). The bank was originally formed in December 23rd 1913 by an act of congress and is currently headquartered in Washington D.C, with twelve other branches located in major cities across the country (Federal Reserve System, 2013).

One of the monetary tools that are used in setting the monetary ...

Abstract

Inflation more often than not is regarded as a bad economic occurrence where prices of commodities and the general cost of living rise. However, inflation also brings positive economic growth and development. Analysts argue that inflation that is regulated presents several benefits for economic growth and development on one hand while on the other factions have refuted claims to the fact that inflation can be utilized to provide any benefits for the economy. Based on an article by Kenneth Rogoff the paper argues for and against the viewpoints of various authors in regard to the benefits visa-vis the disadvantages of ...

Question

Assume that the country is in a period of high unemployment, interest rates are at almost zero, inflation is about 2% per year, and GDP growth is less than 2% per year. Suggest how fiscal and monetary policy can move those numbers to an acceptable level keeping inflation the same. What is the first action you would take as the president? As the chairman of the Fed? Why? What would be your subsequent steps?

Answer

Analyzing the given data indicates us that this economy is suffering from the deflation. In another word, we see high unemployment, very low inflation and very ...

Introduction

The report includes a speculative summary which is highly rendered by the project submitter. The report includes the rules and exemption to work with an accommodated job in United Kingdom. The summary and the report includes the rules and regulations which are necessary as per working in the UK company, and it also discuss about the Tax redemption charges as per the incomes basis of an individual. The report even includes the taxation of any employee working in a UK based company. The rules and regulations are also jotted down to make the project analyst know about the main factual finding ...

The census bureau determines poverty levels in the USA through a comparison between pre-tax incomes against the threshold. The threshold is normally set as three times the cost of the minimum food cost of food diet and is updated every year. The consumer index is updated annually depending on the size of the family, and the prevailing inflation (Ritakallio, 2002). The threshold is not dependent on the geographical position. Poverty threshold is used to track past poverty and compare poverty across geographical regions. The poverty threshold is also used to determine how federal assistance will be distributed and its ...

DQ 1. The Circular Flow in Economics

It is defined as the flow of payment in the economy in a circular motion where the end point goes back to the starting point in an infinite cycle. It can be demonstrated in several ways even with nature. Water cycle for instance works the same way. The water on land evaporates and brought up to the atmosphere forming clouds. As soon as the cloud gets heavy, the water vapor condenses and falls back to land in a form of either water or snow and the same cycle repeats throughout. In economics, the same cycle is composed of three market inputs ...

Our explanation over how these terms are related to each other during building blocks of Theory Construction will be based on Modern portfolio Theory. The Thoery suggests that StockPrices is affected by multiple factors while the hypothesis in this study will be if there is a negative relationship between inflation and stock prices, a positive relationship between foreign exchange rate and stock prices and again a positive relationship between Real GDP and Stock Prices. In other words, the main core thrust of the hypothesis is to study the effect of Macro Economic Variables on Stock Prices.

However, many people confuse the terms ...

When the Federal Open Market committee met in September, information was released suggesting that the economic has expanded moderately in the past recent months. The unemployment levels remain high while the employment rate remains deprecated. The growth in business has decreased while household spending are increasing. It also revealed that inflation has picked up hence the increased energy prices. The Fed is, therefore, concerned that the economic growth may not be in a strong position, to improve the labor market conditions unless sufficient policies are implemented. They are also concerned that inflation will run under its 2% objective due to the ...

- Impact of the Great Depression on the way government set policy

Following the collapse of the stock market in October 1929, the government was forced to embark on various policies in a bid to rescue the collapsing enterprises and to prevent a further economic slump. For instance, the New Deal policies were instituted by President Roosevelt’s administration in order to deal directly with and rescue banks financial institutions which had been affected by the financial crisis leading to the great depression from collapsing (Rothbard, 2008). Further policies included the flexing of the trade barriers and the suspension what was regarded as the ‘gold standard’ which ensured that financial supply would ...

Introduction

2008 Nobel Prize winner, Paul Krugman, published a new book “End this depression now” in which he viewed prompt evolution of the economy to be obtained through government spending. As a result, the economy of any given country should not worry about the deficit it is causing to the country as long as the economy is increasing. It is worth noting that planning is an essential part of any successful undertaking. Therefore, the spending of the government should be a planned one.

However, according to Paul, one ought not to worry about the spending. Therefore, the government should spend so as ...

The application and admissions system for higher education in the United Kingdom has a certain reputation for being easy to get into; many students graduate with A-levels or even A* levels, thus granting them the ability to get into the nation’s top colleges, such as LSE, UCL and Imperial. However, given the large number of secondary school students who end up graduating with such high scores as to get into the most prestigious universities, there is a concern that this affects the quality of the student body in these universities. In essence, the chief question being asked is whether or ...

Identify economic factors that affect the real GDP, the unemployment rate, the inflation rate, and a key interest rate. How do you predict the economy will perform in the next two years given the current state of two of the economic factors you identified? How might your organization be affected by these changes?

World’s economy today has become very volatile with the passage of time. It therefore is a function of a number of monetary and non monetary factors, which have a direct or indirect impact. Factors affecting the real GDP, inflation rate, unemployment rate and the key interest rate include demand and supply, human capital, confidence of the consumer, foreign exchange rate etc. All these factors are interrelated to one other and collectively affect the economy. For instance in a prosperous economy, unemployment rate is very low which increases the demand for goods due to higher purchasing power and boosted confidence of the consumer. ...

- 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 ...

Russia is vulnerable to disruptive terms of trade because of its dependency on oil. Because of fluctuating oil prices, sluggish domestic demands, weak external environment and high rate of inflation, Russia’s economic growth declined in the year 2012 to 3.4 percent, and it is projected to be constant in 2013. Capital outflows in the Russia are expected to increase while debt ratios are expected to be favorable. Russia is a large size economy and its Gross Domestic Product (GDP) growth rate is 3.4 percent. The adjusted dollar terms of the GDP, purchasing power and income per capita is $ ...

Administrative Expenses:

Administrative expenses accounts for one of the maximum share in total expense of the Airport. By the end of 2013, the actual administrative expenses were $73950. The list of expenses that are part of Administrative Expenses are: Referring to Phase I, assuming inflation growth of 1.15 per year, the total administrative expense by the end of Phase I were $549658. Similarly, during Phase II and final Phase, the administrative expenses amounted to $610035 and $677044, respectively. Overall, all the projections were carried out assuming an inflation rate of 1.15%.

Liability Insurance Expenses:

The total liability insurance expense of the company ...

- 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 ...

Abstract

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 ...

- Worksheet entry figures

Cash flow figures and adjustments:

The price used for sales estimation is the £50/MWh tariff that is guaranteed by the government. On the other hand, the megawatts used for the two projects over the 15years period include 60,000 MWh for the small wind-farm and 120,000 MWh for the large wind-farm project.

Cash flow items from the profit and loss account

Adjusted figures - Government grant cash-flow is accounted for in year 1 since it is received in the first year although spread over the 15 years for purpose of profit and loss computation. In that respect the grant receipts for the two projects is calculated as ( ...

Article Review on Financial Econometrics

Cambridge University Article Review on Financial Econometrics For the article review assignment, I have chosen the article ‘Inflation and Real Stock Returns Revisited’ by Shu-Chin Lin, published in the refereed journal Economic Inquiry in 2009. The article addresses the topic of relationship between real stock returns and inflation, aiming to obtain the empirical evidence of the effect of different dimensions of inflation (including anticipated inflation, unexpected inflation, and inflation uncertainty) on the real stock returns. The motivation for the study arises from the inconsistencies between the generalized Fisher hypothesis and the empirical findings of the previous ...

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 total value of ...

Economic factor denotes the foundation or basis of a buying decision . In most cases, customers cannot purchase what is beyond their purchasing power regardless their need for the service or good. Nevertheless, affordability is always an issue of perspective, which elucidates why most customers employ “creative” budgeting to acquire commodities they need. Therefore, good economic condition implies the ability of consumers to purchase what they require without constraints of money. Global economic condition is a factor that affects the business process of Apple Inc since the firm or corporation is internationally recognized . Recession, currency, and inflation are the main economic ...

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; 2. Cost-push inflation ...

Economics is a broad field which has its active recognition in almost every walk of life. Economics is the name of how to earn the money and how to consume it and it is one of the most effective things. There are two different types of economics, which particularly are microeconomics and macroeconomics. There are a number of concepts which specifically come under the ambit of Economics and among them; the name of Taylor Rule is one of them, which specifically associated with the leverage and debt . The main perspective of this assignment is to analyze leverage of financial firms from a ...

Introduction

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 state ...

The Professor’s Name

The economy of the United States is one of the largest national economies in the world, with its GDP(purchasing power parity) of 16.24 trillion dollars in 2012 (World Factbook, 2014). The country’s economy is growing continuously as it has its GDP growth rate is2.8% as of 2012 (World Factbook, 2014). As the data oninterest rates, inflation, and unemployment rate is available for the year 2013 at the latest, I will be analyzing the economic situation in the US for the period of 2009-2013. Even though the country’s macroeconomic condition decreased after experiencing the Global Financial Crisis, ...

Unemployment in the United StatesUnemployment in the United States talks about the reasons and measures of U.S. unemployment and techniques for lessening it. Job creation and unemployment are influenced by elements, for example, investment conditions, global competition, education, mechanization, and demographics. These elements can influence the amount of specialists, the term of unemployment, and compensation levels. One real answer for anticipating unemployment in the United States is to keep the economy developing and creating through a dynamic business cycle. Using cash in a social order is one of the most ideal approaches to keep the economy consistent.

Labor Force Statistics graph ...

Introduction

This paper summarizes the key policies that were implemented by the United States Federal Reserve Bank in the period between 2008 and 2010. This time period under review presented a unique economic environment for the Federal Reserve and the US economy as a whole, due to the Global Financial Crisis which begun in the second half of 2008. This paper seeks to understand the key decisions that the Fed took in averting the deepening of the crises, and in steering the economy back on the right course. By and large, the decisions taken by the bank are to a large extent a reflection ...

Answer 1)

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 medicines. ...

Essay

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. ...

India

India

India is one of the largest countries in the world with a surface are of 3,287,263 square kilometers. It is located in South-central Asia. India is bounded in the southwest by the Arabian Sea and the Bay of Bengal in the southeast. In the north, India is bounded by China, Bhutan and Nepal. South of India is the Indian Ocean. Other nations to the south of India are Maldives, Indonesia and Sri Lanka. In the east, the nations that bound India are Burma and Bangladesh while on the west, India is bounded by Pakistan. India boasts ...

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 ...

Introduction

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 joblessness and ...

I think that Jeffery Sachs’shock therapy that was administered to several was successful for the improvements it made on the nations that undertook it. It helped manage price controls and reduce on unemployment. It was even more of a success because the process liberated the markets and eradicated hyperinflation. Sachs Jeffery an economist saw the falling economies of communist states and took it upon him to find means taking the economies back on their feet. Was Jeffery Sachs successful in his quest to heal nation’s economies through the shock therapy? Did the program bring good or harm ...

The gross national income nearly equals that of the United States due to the big population of China compared to the population of the United States.

Inflation rates The inflation rate of Nigeria was at 8.10 percent by October 2014. The figure has increased at the moment to about 8.3 percent. However, this is not the highest inflation rate in Nigeria. An inflation rate of about 47.56 percent was recorded in the January 1996. It has also had the lowest inflation rates in the in 2000 when the inflation rate was -2.49(Nigerian Bureau of Statistics, 2014)

Interest rates

The ...

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

Abstract 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 financial ...

Egypt is located is the northeastern part of Africa, and the majority of the country’s economic activities is concentrated in the Nile valley, a highly fertile area that bisects the country. The economy of Egypt is mainly represented by agriculture, industry, and services sectors, which comprise approximately 14.5%, 37.5%, and 48% of the country’s GDP respectively (CIA World Factbook, 2014). Key economic sectors include tourism, construction and manufacturing. Governmental actions and political uncertainty negatively impact the country’s economic condition for the past several years. As a result, Egypt shows a declining economic growth and rising unemployment rates. This paper ...

The exchange rates in the market are bilateral, that is, comparing the values of a currency against the other. However there is a need to compare a currency with that of several counties .Effective Exchange Rate refers to the index describing the strength of a county’s currency in reference to the basket with other currencies. Let’s assume a country has M trading partners denoted by Trade i and Ei representing the trade and the exchange rates with country i. The effective exchange rate will be calculated as: E effective =E1Trade1Trade+. + EM TradeMTrade

The Effective exchange Rate is divided into two namely: The Nominal Effective Exchange Rate and The Real Effective Exchange Rate.

Nominal Effective Exchange Rate (NEER): This is the ...

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 ...

The analysis of 15% guarantee sounds satisfactory since it is above the average and the historical average in the country. Going by such a rate, it means that the investment in the annuity will earn an amount of 240000 annually which is above the $120000 required for annual maintenance. However, the couple has a high aversion to risks and unaware of the market shocks and the decline in stock prices that the country experienced in 2008. They, therefore, feel that your analysis is not adequate to address these concerns. Supposing that the market experiences financial problems again, and the value ...

Introduction

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. GDP= C+I+G+NX Gross domestic product is never constant, but change due to many reasons like changes in government policies mainly in ...

Abstract

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, ...

Objectives

This is a personal financial plan aimed at offering assistance in creating enough wealth for retirement. The financial plan will also help in estimating personal expenses in the next twenty years. By estimating the annual cost of living in the next twenty years, the financial plan will provide a clear picture of personal expenses. Further, the plan will stipulate the necessary actions to achieve the goals.

Specific Goals of Financial Plan

The aim is to accumulate enough wealth that will generate $40,000 per year for the first 20 years of retirement. It is important for the financial plan to take into account inflation that is ...

Chapter-1

Introduction When it is defined about economics, then it will be definite about the inflation and economic growth (Banerjee and Duflo, 2011). Economies are always in comparison with other economies in terms of enhancing their economic growth and minimizing the level of unemployment rate accordingly. Earning the money and consuming it in a perfect and best possible manner is a basic definition of economics, and economics are utilizing it in a better way. Apart from earning and consuming the money at a better place, economic development and economic management are some of the important aspects that associated with the long run efficacy ...

Business Study Skills Individual Report

Abstract The study investigates the economy performed in Japan over the last decade. The studies have shown that there has been an increasing based on an unmanageable model of unbalanced economic growth. The study finds that there was a surprise fall in GDP from 2.1% to 1.6% in Japan due to debt brought by household consumption and increase in sale tax. This has made Japan’s economy to shrink. The government expenditure has developed by 29%, which outdo the rest of the economy growth. There is actual prove that there was a fall in GDP of business investments from 11.7% ...

Monetary policy

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 the ...

Assignment

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 efficient. In ...

Question 1. Explain the two theories of aggregate supply. On what market imperfection does each theory rely? What do the theories have in common?

Answer:

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, ...

Question 1

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 in ...

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 of ...

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 ...

Article Review

Article 1 Published on: October 22, 2014

The Summary 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. ...

Impact of Currency Devaluation on Argentina’s Economy

In January 2014, Argentina devalued its currency, peso, by 15 per cent against the United States dollar; this represented the sharpest decline since the 2001 devaluation when Argentina had failed to pay its foreign debt. Previously, the Argentine economy experienced current account surpluses due to high commodity prices and competitive exchange rates. Nonetheless, poorly formulated and implemented policies led to a decline in the current account balance and finally into a deficit. The devaluation of the currency will significantly lower the price of Argentine products in the international market increasing their competitiveness. In the converse, imports will be more expensive. In ...