1. Suppose that changes in bank regulations expand the availability of credit cards so that people need to hold less cash. If the central bank does not respond to this event‚ what will happen to the price level? Use a diagram to assist in answering this question. [5 marks] 2. Use the loanable funds model to explain what happens to interest rates and investment if a government moves from a balanced budget position to a budget surplus. [10 marks] 3. Suppose that the T-account for The Open Campus
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Inflation vs. Unemployment Inflation and unemployment are two key elements when evaluating the economic well-being of a nation‚ and their relationship has been debated by economists for decades. Inflation refers to an increase in overall level of prices within an economy; it means you have to pay more money to get the same amount of goods or services as you acquired before and the money becomes devalued. For example 10 dollars seventy years ago had the same buying power that 134 dollars have today
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better: inflation or deflation? Inflation is a phenomenon of rising prices without causing change in the levels of employment and output. Deflation‚ on the other hand‚ is a phenomenon of falling prices accompanied by a fall in the levels of employment and output. Both inflation and deflation are harmful for society and have undesirable economic consequences. But when the question of a choice between the two evils of inflation and deflation arises‚ the lesser evil is to be selected. Inflation is the
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’s Inflation and its effect on Supply Chain Industry (Retail) By Kamal Deep Introduction This white paper details out how inflation is affecting the Retail economy and its health. This paper also suggests what care needs to be taken by the Retailers for tackling inflation. Purpose of this Project For applying the Macro Economics class room learning’s practically Scope of
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Exact prediction of inflation and unemployment in Germany Ivan O. Kitov Abstract Potential links between inflation‚ π(t)‚ and unemployment‚ UE(t)‚ in Germany have been examined. There exists a consistent (conventional) Phillips curve despite some changes in monetary policy. This Phillips curve is characterized by a negative relation between inflation and unemployment with the latter leading the former by one year: UE(t-1) = -1.50π(t) + 0.116. Effectively‚ growing unemployment has resulted
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marks) Question 3: (i.a) Illustrate and explain with diagrams the difference between demand-pull and cost-push inflation; (2.5 marks for the diagram and 2.5 marks for the explanation); (i.b) Provide (describe) two (2) causes of each type of inflation (2.5 marks for 2 demand-pull causes and 2.5 marks for 2 cost-push causes) Cost-push
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money from Federal Reserve banks. Why is this number so important? It is the way the Federal Reserve (the "Fed") attempts to control inflation. Inflation is caused by too much money chasing too few goods (or too much demand for too little supply)‚ which causes prices to increase. By influencing the amount of money available for purchasing goods‚ the Fed can control inflation. Other countries’ central banks do the same thing for the same reason. Basically‚ by increasing the federal funds rate‚ the Fed
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Grade inflation is an issue where instructors give passing grades to students that do not deserve them and this is an issue that can be seen going on in colleges and universities across the country. Teachers do this for multiple reasons whether it be to keep their jobs‚ to fill their classrooms‚ or to keep from having to clash with students about a failing grade. This is an issue in schools due to the fact that grade inflation ruins a school’s reputation and leaves students that did not deserve the
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Table of Contents I. II. III. INFLATION IV. V. MEANING VI. Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. The price of only one commodity rising but the price of other commodities falling or the increase in the price of a commodity during a day is not termed as inflation. VII. For example‚ let’s consider that there are only two commodities: bread‚ and paper money printed by the government. In a year when there is
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Inflation Targets‚ Credibility‚ and Persistence In a Simple Sticky-Price Framework Jeremy Rudd Federal Reserve Board Karl Whelan Central Bank of Ireland July 23‚ 2003 Abstract This paper presents a re-formulated version of a canonical sticky-price model that has been extended to account for variations over time in the central bank ’s inflation tar- get. We derive a closed-form solution for the model‚ and analyze its properties under various parameter values. The model is used to explore
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