D) All of the above. E) None of the above. Answer: ___ 2) As the proportion of labor contracts with wage indexation increases, we would expect that: A) nominal wages will become more sensitive to changes in unemployment. B) a reduction in unemployment will have a smaller effect on inflation. C) the natural rate of unemployment will decrease.
The GDP value would then decrease, due to the move from Point A to C, and increase employment which would decrease savings. In addition, there is an inverse relationship to both bond prices and interest rates because as one increase in value, the other decreases, and vice versa. 2. IS-LM Model--Suppose that you have the following equations for the IS-LM model. The following are the equations of the IS-LM model, here including a feature that taxes are not simply given but depend on income through a tax function, T(Y).
Demand side policies are those that manipulate the level of aggregate demand (AD) to achieve one or more economic objective. The policies can be fiscal policies (changes in government spending and/or taxation), or they might be monetary policies (which are largely changes in the short-term rate of interest). The four major macroeconomic objectives are a sustainable level of economic growth; low inflation; low unemployment; and a medium term balance on current account. Recently the government have used loose fiscal policy and the MPC have reduced the rate of interest. These are designed to increase the level of AD and increase in national income.
Government spending consists of salaries for government employees, defense spending, aid programs, and other cash outflows. Government revenue primarily consists of taxes. When the government spends more than they receive in the form of revenue, a budget deficit occurs. The causes and the implications for long-term economic growth due to a high budget deficit on the economy, along with the role that fiscal and monetary policy plays, will be defined and explained. The development of a increasing budget deficit has been caused by a weak economy and the result of increased government spending in areas such as health care, education, defense spending, low interest rates, lowering taxes, and the increase in welfare and entitlement programs.
According to the calculated ratios in Table-1, SSB had the following major trends in profitability during the time of 1991 to 1993: Decreasing return on equity (ROE) – shareholder return Gradual & unsteadily decreasing return on assets (ROA) – managerial efficiency Decreasing net non interest margin ? less profit earned on non-interest banking components Increasing earnings spread ? have established effective processes of borrowing and lending money with little immediate threat of competitors Unfavorably increasing operating efficiency ratio – there is an excess of operating cost in relation to operating revenues generated by SSB. Declining credit risk/depositor risk ? decline of bad loans, increased market values of good loans relative to amount of deposits.
Or in other words Inflation occurs when the supply of money far exceeds the supply of goods and services. The functions of money are to serve as a medium of exchange, a unit of account, and a store of value. Inflation mainly affects the ability of money to serve as a store of value, since inflation erodes money's purchasing power, making it less attractive as a store of value. Money also isn't as useful as a unit of account when there's inflation, because stores have to change prices more
a. Companies’ production opportunities decline, leading to a decline in the demand for funds. b. Households save a larger portion of their income. c. Households increase the amount of money they borrow from their local banks. d. Statements a and b are correct.
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price.