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Economics, Accounting & Business: Post your doubts here!

sharfa riyaz

sharfa riyaz

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Manesh said:
because for utility maximisation marginal utility per $ for all goods should be same. It is calculated by dividing marginal utility with price. just cross that formula and it will become
(marginal utility of X/price of X) = (marginal utility of Y/price of Y)
which is compulsary to maximise satisfaction.
Click to expand...

Thank you! we need to use math there! thankz
 
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Saiyan

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Guys I need you all to know something. I may not be available later as there is an electricity crisis going on in Bangladesh so if there are any serious problems ask me now.
 
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Saiyan

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memyself said:
Why cant q5 be C?

http://www.xtremepapers.com/papers/CIE/Cambridge International A and AS Level/Economics (9708)/9708_w10_qp_32.pdf
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Finally! Someone came up with a question. You need to remember that I firm does not change its production process due to internal factor. The thing is that C is an internal factor and you may not know labour productivity may be increased due to better usage of capital. If the cost of capital which is also the interest rate increases firms are forced to employ more labour than capital if it does not have the sufficient money to finance it.
 
memyself

memyself

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Saiyan said:
Finally! Someone came up with a question. You need to remember that I firm does not change its production process due to internal factor. The thing is that C is an internal factor and you may not know labour productivity may be increased due to better usage of capital. If the cost of capital which is also the interest rate increases firms are forced to employ more labour than capital if it does not have the sufficient money to finance it.
Click to expand...

Thankyou.
And if u're so willing to help, same paper Q22 please!
Why does velocity reduce when interest rate fall, shouldn't it be the opposite since there are fewer savings and more borrowings now?
 
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Saiyan

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memyself said:
Thankyou.
And if u're so willing to help, same paper Q22 please!
Why does velocity reduce when interest rate fall, shouldn't it be the opposite since there are fewer savings and more borrowings now?
Click to expand...

Now this is a good question. You have to use the elimination technique for answering this.
A- Untrue, money supply don't affect the speculative demand, it is an idle balance and it is interest elastic. Yes the interest has reduced but this question is related to money supply not interest.
B- Price will rather increase according to monetarists.
C-The price of govt bond will rather increase
D- The velocity of circulation of money will decrease due to the view of keynesians they say that the money supply does not affect inflation as it has been stabilised by the desire to hold money. In short run it is said that people will not be able to allocate their expenditure in short run therefore they save and the velocity of money reduces.

Excellent question!
 
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Manesh

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memyself said:
Thankyou.
And if u're so willing to help, same paper Q22 please!
Why does velocity reduce when interest rate fall, shouldn't it be the opposite since there are fewer savings and more borrowings now?
Click to expand...
Because other three will increase and its also Fischer's equation of exchange.
 
memyself

memyself

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Saiyan said:
Now this is a good question. You have to use the elimination technique for answering this.
A- Untrue, money supply don't affect the speculative demand, it is an idle balance and it is interest elastic. Yes the interest has reduced but this question is related to money supply not interest.
B- Price will rather increase according to monetarists.
C-The price of govt bond will rather increase
D- The velocity of circulation of money will decrease due to the view of keynesians they say that the money supply does not affect inflation as it has been stabilised by the desire to hold money. In short run it is said that people will not be able to allocate their expenditure in short run therefore they save and the velocity of money reduces.

Excellent question!
Click to expand...

Okay, so does the velocity of circulation always reduce as a result of an inc in money supply?
 
memyself

memyself

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Manesh said:
Because other three will increase and its also Fischer's equation of exchange.
Click to expand...

Can u please relate this to the Fischer's equate? MV = PT
we only know abt the element 'M', how would we deduce anything from this?
 
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Saiyan

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Manesh said:
Because other three will increase and its also Fischer's equation of exchange.
Click to expand...

Manesh my friend you said something wrong. Speculative demand is an idle balance but it is interest elastic in the sense that reduction in interest will lead to higher speculative money balances as it is the finance saved in monetary form rather than other financial asset. The money supply actually decreases the speculative demand if you look at the curve. The question asks whether money supply result in decrease of another element and it will be D according to Keynesians.
 
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