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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%.
Q. Show the example on multiplier effect? Emma makes a deposit: Emma has 1,000 in her mattress and decides to deposit it in K-bank. Deposit won't affect the money
After the fall of the king, a tax rate of 20% has been introduced in the Frog Islands Republic. The value of Sun corporation is now 100.000€. Bright Star Co. debt has no changed. T
Determination of all endogenous variables We can explain how all the endogenous variables are determined in below figure: Figure: The Keynesian model with the Phillips c
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What is the price elasticity of demand? It is the Defining and Measuring Elasticity. The price elasticity of demand is the ratio of the percent modification into the quantit
Deposit K4000, liquid asset k1000, loans K4000. what is current liquid asset?
Suppose that quantity demand falls by 30% as a result of a 5% increase in price. What would be the price elasticity of demand for this good?
Overnight target rates and inflation One of the major targets of every central bank is a low and stable inflation. Its main control variable is the overnight interest rate tar
State the Price level and time We are rarely interested in the value of price level at a specific point in time. What we are interested in is percentage change in the price lev
With the aid of a diagram explain the Philip''s curve
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