Purchasing Power Parity Anyone??
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Economics, Accounting & Business: Post your doubts here!
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THANKS! but i still feel that A can be right! because idle balances are interest inelastic!
In economics, purchasing power parity (PPP) asks how much money would be needed to purchase the same goods and services in two countries, and uses that to calculate an implicit foreign exchange rate.
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.
answered by Saiyan
A country that commits itself to maintaining a fixed parity for its currency will effectively lose control over interest rate determination. That does not mean that it will no longer be able to have its own ‘independent’ central bank. What it does mean is that the interest rates set by the bank will be governed by the foreign exchange markets.
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No my friend. This is a common mistakes by many students. Just go to the CIE Economics books by Colin Bramford, speculative demand is in fact an idle balance and it is interest elastic. Remember this way idle balances are not affected by anything except interest. Precautionary and Transactionary are inelastic and are active as they are affected by all things except interest.
an improvement in productive efficiency implies producing whatever level of output is produced at a lower cost.
Hence the answer C...controlling prices....
This was a sitter Manesh! Private Firms aim for profit maximisation so if prices are controlled then this also improves the productive efficiency of the firm.
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Thankz alot! i understood perfectly!
Thumbs up if you understood that so quickly! That took a lot of days to understand
You guys can take help from Sir Qamar if u need.. he explains well and he is helping us a lot Qamar Baloch
He is answering our questions check the group discussin Economic P4 Guess Paper he is there to help us out..
He is answering our questions check the group discussin Economic P4 Guess Paper he is there to help us out..
so it has to set interest rates that will keep its currency at the ppp level?
what i did was compared the capital formation and the depriciation. Since growth can occur only when capital goods increase the answer is A as it is the only one with a positive capital formation.
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Ohkay its look like im gonna fail my eco paper..
Tell me
the relationship between MC AVC AFC AV of market structures and how they react with cost to increase or decrease output
How a firm sees is MRP curve and how it reduces the demand of MRP
How Productive and Allocative efficiency occurs in market structures..
just help in micro otherwise im gonna fail :|
I need a complete explanation
You take into account the capital formation and depreciation. Subtract the depreciation from the capital and get the net capital. The one highest or positive is your answer. Ignore consumption as we are calculating the efficiency of the capital goods.