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Effects of inflation:
On Income Earners:Those on fixed incomes or assets (fixed in nominal terms) lose. However, those on incomes, which are directly related to the price level, real incomes may remain relatively unchanged or may even increase.On Profits: Generally, profits increase when the inflation is the demand pull type and decline when the inflation is the cost push type. During demand pull inflation the prices of final goods and services tend to be more flexible in an upward direction than many other prices.On Lenders and Borrowers:Inflation tends to encourage borrowing and discourage lending. This is so because what is borrowed today which could have been used to purchase, say a bowl of gari today, would not enable the creditor to purchase the same bowl of gari when the loan is paid back. This is true only when nominal interest rate is fixed or rises at a lower pace than inflation.On Production: Demand pull inflation may lead to inefficiency in production since competitive pressures to improve both product and performance will be greatly reduced.Cost-push inflation however, puts a premium on efficiency.On Foreign Trade:Rising domestic prices can hurt exports.If domestic prices are rising faster than the rest of the world prices, exports will fall and imports will tend to increase and this will invariably affect our net exports and may have devastating balance of payment implications.
How might a country exchange rate influence the balance of payments? Definition of the exchange rate; price of domestic currency in another (basket of) currency (currencies). C
Supply of Basic Industrial Inputs: Allowing their duty-free imports by exporters would require an elaborate machinery of customs and import licensing to ensure that the impor
On what kind of income is our taxing system based?
3. Which of the following would not be an expansionary fiscal policy? a.Increased welfare payments to the poor b.Decreases in federal taxes on corporations c.A balanced budget d.I
Time is a significant determinant of price elasticity. If a price changes, it might take consumers a certain amount of time to discover alternative lifestyles or commodities to ac
illustrate and explain using diagrams how a single seller within the market can maintain an inefficient allocation of resourcesquestion #Minimum 100 words accepted#
specific characteristics of human existance
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Explain the meaning of the statment "coffee and tea are close substitutes".
Substitution Effect - The substitution effect is change in an item's consumption associated with the change in the price of the item, level of utility held constant. - Wh
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