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Q. Interest rates and inflation?
Assume you have 1 million on 1st January 2008. A basket of services and goods similar to the CPI basket costs 100,000. You can then purchase exactly 10 such baskets on 1st January 2008.
Say that you can invest your million at a 10% interest rate. On 1st January 2009 you will then have 1.1 million. 1.1 million may not be enough for 11 baskets as prices may have changed. Let's say that inflation was 4% in 2008. Price of a basket has then increased to 100,000 * 1.04 = 104,000 and you can buy 1,100 / 104 = 10.58 baskets which is 5.8% more than last year. Yet your wealth has increased by 10% (in whatever currency you use), your real wealth (in baskets) has only increased by 5.8% and we say that real interest rate is 5.8%.
An increase in growth rates will cause the production possibilities curve to a. shift inward. b. become steeper. c. become flatter. d. shift outward.
Firms such a Moody's and Standard &Poor's study corporations that issue bonds. They publish "ratings" for the bonds- evaluation of the likelihood of default. Suppose these rating c
What is banking?
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Suppose P(X1)=.75 and P(Y2/X1)=.40. What is the joint probability of X1 and Y2?
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HOW CAN A COUNTRY MAINTAIN EQUILIBRIUM GDP IN AFOREIGN TRADE?
Q. Demand for money and GDP? The demand for money also relies on the GDP as GDP is closely associated to national income. If you choose to hold a fixed proportion of your wealt
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