for the banks to borrow reserves. By raising the interest rate it pays the banks on their own deposits at the Bank of Canada‚ it can induce the banks to want to hold larger reserves. By selling securities in the open market‚ the Bank of Canada can decrease the monetary base. The Bank of Canada
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is rational in his behavior if he attempts to maximise his satisfaction while he is spending money on the purchase of different goods and services. Likewise a producer is rational‚ if he attempts to maximise his profits. Q.8 Explain concept of marginal cost with the help of an example. Ans. It is the addition to the total cost by using an additional unit of
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rate mortgages so people might decide to consume less. If consumption decreases this means aggregate demand (total expenditure of all goods or services in an economy) will also decrease because consumption is a component of AD. The AD curve will be pushed inwards from AD2 to AD1. As a result‚ this decreases the price level and real output. If there is a decrease in the price level this will cause a decrease in inflation. If there is an increase in decrease output there will not be economic growth
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The introduction of credit cards has been a modern method for monitoring and controlling transactions‚ which were previously‚ conducted using cash. “ A credit card is a transaction tool‚ one which gives customers the opportunity and ability at the point of sale to decide whether they want to pay for the purchase over a longer payback period‚ pay it in full or pay a portion of it at the end of the month.” (Jackson‚ 2008) Credit cards have replaced cash in most markets and trading places in the United
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1 Managerial Economics 2010 Answers to All Tutorial Questions Topic 1 : What is managerial economics Questions from Chapter 1 of the Text (McTaggart‚ Findlay & Parkin) Review Question 1 (pp. 4) List some examples of scarcity in Australia today. An example of scarcity at the economy-wide level would be people with lower incomes being forced to choose between food and petrol due to high prices for both. An example of scarcity at an individual level would be a person unable to afford both
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contractionary monetary policy causes aggregate demand to D decrease‚ output to decrease and the price level to decrease because contractionary monetary policy is a decrease in the money supply and shifts AD to the left. 5. Assume the reserve requirement is five percent. If the DEF sells $10 million worth of government securities in an open market operation‚ then the money supply can potentially b decrease by $200 million if the reserve requirement is
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demand are caused by changes in the volume of investment. The volume of investment is directly related to the marginal efficiency of capital. The investment increases in response to higher marginal efficiency of capital and decreases with the fall in the profit expectations of the entrepreneurs. The Keynesians further put forward the theory of multiplier which shows how the increase or decrease in investment causes multiplied changes in income and employment and thus heightens a boom or deepens a depression
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saving increases from minus $100 to a plus $100‚ her marginal propensity to: A) save is three-fifths. B) consume is one-half. C) consume is three-fifths. D) consume is one-sixth. 3. A decline in disposable income: A) increases consumption by moving upward along a specific consumption schedule. B) decreases consumption because it shifts the consumption schedule downward. C) decreases consumption by moving downward along a specific consumption
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profits. For example‚ hiring an extra unit of labor increases output and therefore increases revenue; the firm compares this additional revenue to the additional cost from the higher wage bill. The additional revenue the firm receives depends on the marginal product of labor (MPL) and the price of the good produced (P). An additional unit of labor produces MPL units of additional output‚ which sells for P dollars per unit. Therefore‚ the additional revenue to the firm is P × MPL. The cost of hiring
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Income equality is the equal distribution of income amongst the different classes and households‚ and is a main government objective‚ the fifth one‚ as well as full Unemployment‚ price stability‚ equilibrium of balance of payments‚ and Economic growth. As there is always some amount of income inequality‚ this determines the classes in society‚ with the aim to reduce this benefiting the lower class‚ the poor‚ s opposed to the upper class‚ the wealthy. Redistribution of income‚ the method by which
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