e. Which price index rises faster, the GDP deflator (Paasche) index or the fixed-weight index (Laspeyres) index 1 Question 3 (20 marks) . . Suppose that an economy’s production function is = . a. What fractions of income do capital and labor receive?
For what reasons might the supply of potatoes fall? Examples include: 1. The cost of producing potatoes rises. 2. The profitability of alternative crops (e.g.
(asic.gov.au) · As the financial markets became mainstream and matured, the access to capital markets and their scrutiny have both increased. Along with the added volatility, the lending markets have seen similar risks as equity markets. With the increased speed of both financial information and market changes, the rating agencies are more important as a first step, as they are to be scrutinized for their ratings and the trend in their rating changes. (investopedia.com) · CRAs and their ratings played a critical role in the recent market turmoil. Unlike securities trading on deeper, more transparent markets, credit ratings have had an inordinate impact on the valuation and liquidity of subprime RMBSs and RMBS backed
Many economists believe “that a rapid stock of the nation’s money causes inflation” (pg.169). The rate of inflation can affect borrowing power for a new business owner as, “the rate of inflation expected by the borrower and the lender will be influence by various interest rates” (pg. 169). When inflation is high, many lenders interest rate increase to compensate for the impact inflation has on their business and the decrease in purchasing power of money that has to be paid back in the future. Since, the FED set the interest rate in which the banks borrow from, Edgars’ ability to borrow enough money or establish a line of credit to start his business will be affected by inflation, interest rate and financial policies.
Factors That Affect Interest Rates: 1. Impact of economic growth on interest rates: Economic growth puts upward pressure on interest rates by shifting demand for loanable funds outward. Economic slowdown puts downward pressure on the equilibrium interest rates by shifting demand for loanable funds inward. (Exhibits 2.8 &
Increase in Retained Earningsd. Increase in Unearned Revenuee. Decrease in Interest Payablef. Increase in Prepaid Insuranceg. Increase in Wages Expenseh.
Proponents of the notion of a "political business cycle" suggest that: A. The standardized budget is a better indicator of the state of the economy than the actual budget B. Cyclical swings in the economy are produced by the inherent instability found in capitalist economies C. A possible cause of economic fluctuations is due to the use of fiscal policy for political purposes D. There is a tradeoff among goals that tends to make the economic policies of state and local governments procyclical 19. One of the timing problems with fiscal policy is an "operational lag" that occurs between the: A. Beginning of a recession and the time that it is recognized that the event is occurring B.
These factors indicate current and future values of the short-term rates, therefore it creates issue with future long-term rates. Lower rates and positive economic activity adds value to the dollar in oversea markets. Households spending increases, businesses invest in property and equipment, and production leads to new hires. Conversely, when inflation is threatening, the Fed reduces the risk by shrinking the supply (Keynes,
Governments may choose to increase minimum wage on an arbitrary basis, making it difficult for companies to hire individuals at a consistent market rate. Government price controls distort the economic theory of supply and demand. Supply and demand is a significant underlying feature of free-market economies. This theory allows individuals and businesses to make decisions based on self-interest. Businesses often pay individuals a wage based on current market standards.
Todays United States runs on the American dollar and using the U.S just as an example because of Wall street and what big time Corporations do for the nation we as a community can build up and keep repairing the foundations. The idea is that stock exchange and and different financial markets are the basis of an economy and its growth. With markets come money and with money comes infrastructure upgrades which improves transportation speeds, this then moves onto that population is fueled by money and these markets create jobs for those able enough to work and with more money they can afford to have children and higher upkeep on housing. All of this keeps going into a full circle until the final limit is reached, but with the ceiling that this world has it could be a while before anyone within the next few generations will ever see