The changes in the rand/dollar exchange rates are influenced by the long term trends in the consumer prices of the RSA and the USA. There also exists a well defined money demand function for this period. The broad money demand is influenced by the consumer prices, the GDP and the interest...
inflation is that inflation is a continuous and obvious rise of price level caused by great increase of money supply and it reduces the purchasing power of each unit of a currency. ___ Consumer Price Index ( CPI), the Producer Price Index ( PPI) and the GDP Deflator. ___ (1)...
According to classics, if aggregate demand falls, what will happen to the real GDP and the price level? Why? Suppose the Bank Of America reduces money supply by 5%. a. What happens to the aggregate demand curve? b. What happens to level of output and pri...
The graph below illustrates this dangerous dynamic. When the interest rate on government debt rises above the nominal growth rate of the economy, the debt-to-GDP ratio starts to increase automatically. Without meaningful fiscal reform, this leads to an accelerating debt burden and, eventually, a ...
Deficit-to-GDP ratios decline as the nominal values of the economy’s output and of tax bases generally rise, generating more revenues. …an unexpected bout of inflation will erode part of the real value of government debt persistently, both owing to the initial improvement in fiscal balances ...
when the government injects too much money into the economy as indicated by high M2/GDP ratios. When money is plentiful, banks have sufficient lendable funds tofinanceinvestment. This allows borrowers to bid up asset prices and eventually causes bubbles, commodity price appreciation, and thus...
Last week, the ISM Services report indicated slowing growth and increasing prices, with four fewer industries reporting growth than during the previous two months. A continued downward trend would be problematic for the broader economy, as services contribute the majority of GDP. Job Market Wobbles:...
How does monetary policy affect equilibrium GDP? What is partial equilibrium in economics? What does the purchasing power parity theory say? Give an example to illustrate your answer. At equilibrium, savings in a closed economy will investment. A. be greater than B. equal C. be less than ...
recorded by the US Treasury as being in foreign ownership, there are foreign exchange dollar commitments in non-US banks totalling a further $85 trillion, and a further $10 trillion in eurobonds. At over $120 trillion overhanging financial markets, that’s more than four times US GDP. ...
Here MDis the aggregate, economy-wide money demand, P$is the current US price level, Y$is US real GDP, and i$ is the average US interest rate. The f stands for "function." f is not a variable or parameter value, it simply means that some function exists that would map values for...