...following statement with the help of an example: “WHILE ALL GIFFIN GOODS ARE INFERIOR GOODS, ALL INFERIOR GOODS ARE NOT GIFFIN GOODS” Solution:- Demand may be defined as desire backed by adequate purchasing power. Benham therefore says – “the demand for anything at a given price, is the amount of it which will be bought per unit of time at that price.” Law of Demand: - The Law of Demand states that when the price of a commodity rises, there occurs a fall in the amount purchased. Conversely, when the price of a commodity falls, the amount purchased increases. From the Law of Demand it follows that the Demand Curve, which shows how much of a commodity is purchased in the market curve at different price, is a curve sloping downwards from left to right. The demand curve may, under certain circumstance, rise upwards. In the figure which is given below, DD1 is the demand curve of a commodity. The downward slope indicates that when price rises, less is demanded, and when price falls,...
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...Depreciating Rupee: Introduction: Depreciation refers to a fall in the value of the domestic currency which is caused by the demand for foreign currency exceeding its supply in the market. In such a situation one has to pay more than before to get units of foreign currency. This fall takes place in the market and on its own. Market determined exchange rate serves the purpose of aligning the domestic economy with the world economy was the price route. As consequences the domestic price gets linked up with those of the world price. With the liberalizations and globalization of the economy in recent years, imports are bound to increase. The lessening of restrictions on imports and lowering of tariff on imports which the economic reform implies, an increase in imports has in fact taken place. Again with trade having become an important element of the new strategy of growth. As per the basic laws of economics if the demand for USD in India exceeds its supply then it’s worth will go up and that of the INR will come down in that respect. It may be that importers are the major entities who are in need of the dollar for making their payments. Likelihood here could be that the Foreign Institutional Investors are retreating their investments in the country and taking them elsewhere. This can create a shortfall in supply of the dollar in India. This state of affairs can only be addressed by exporters who can bring in dollars in the system....
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...Indian economy. Since last few months Indian rupee came under great stress as overseas investors are paring their exposure to Asia’s third-largest economy amid international uncertainty and mounting worries over the domestic economy. In 2009 – 2010 the exchange rate was hovering around the 43 – 45 rupees per US Dollar level. And now it is around 55 – 56 levels, the main reasons to examine are increase in import bill, higher inflation, fiscal mismanagement and all resulting in higher cost of borrowing. The rupee has lost more than 15% of its value this year, making it one of the worst performing currencies in Asia. This paper reviews the probable reasons for this depreciation of the rupee and the outlook for the same. It also reflects on the policy options to help prevent the depreciation of the Rupee. This paper will firstly discuss about the economy of currency to give an overview of the problem and the factors related to it. Afterwards it will be examining the causes of the Indian rupee depreciation with respect to the Indian economy and the global economy. And after that it will analyse the impact of the same on trade and business. Finally, recommending the policy actions in response of the falling currency. II. LITERATURE REVIEW: These papers include the work which have been used as a basis or reference for formulating the policies regarding ‘The Indian Rupee Crisis’. Singhal, Shelly (2011), “AN ANALYTICAL STUDY ON INDIAN CURRENCY RUPEE DEPRECIATION AGAINST THE US DOLLAR...
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...|Review Exam – Semester Two 2015 | |Course Code: | |ECON1246 /1273 | | | |Course Description: | |Macroeconomics 1 | | | |ALLOWABLE MATERIALS AND INSTRUCTIONS TO CANDIDATES | |Write your full name and student number on each exam booklet together with the number of exam books used. | |Students must not write, mark in any way any exam materials, read any other text other than the...
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...political instability and lack of freedom. As a whole, the cause for these situations, thereby leading to the fall of Soviet Communism, can be categorized in two main reasons – developments inside of USSR, and developments outside the USSR. While the external developments such as role of Ronald Reagan & his policies, the Pope’s involvement, rise of non communist movements in Eastern Europe and price of oil and effects on USSR did played a significant role in breaking the Soviet Communism, it is still undeniable that the internal developments, mainly the USSR leaders’ (Brezhnev and Gorbachev) policies, made larger and more tangible impacts that raises the resentment and opposition to Soviet domination, causing it to fall apart. The developments inside the USSR therefore did more to cause the collapse of the Soviet Communism. To begin with, one of the early causes of the fall of communism is due to the stagnation period under Brezhnev where economy did not improve, or rather, declined (which can be seen from USSR’s continuous importing of grain from US). This stagnation was due to expanded military and neglected domestic economy. As a whole, this period played an important role as it caused standard of living to worsen and people started to question the Soviet’s ruling capability to provide them with their Utopian ideal of communism. For example in Poland, the decline in economy led to food & fuel shortages and high prices, all of which would decrease the standard of living. These...
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...answer this question, we have to first understand that Quantitative Easing in US is a long dragged out process. Beginning with QE 1 initiated in November 2008 and in fact up till today, QE 4 is still taking place, also called QE infinity, it will take place until unemployment rate falls below 6.5% or until core inflation rose above 2.5%. Hence, when evaluating the success of something that lasts so many years, what constitutes a success? Are we referring to whether QE can prevent an economy from falling into a deep recession? Or do we define success by bringing an economy in a recession state back to full employment? Slide 2: Let me now bring you back to the year 2008 when QE was first introduced. The economy was in a constant downhill slide. It can be said that the first round of QE was effective in preventing the economy from sinking further into the great recession, where in late November 2008, the Federal Reserve started buying $600 billion in mortgage-backed securities, helping to stabilize the economy. Government purchase was halted when economy had an improvement. However, after a while, they realise that the economy is not growing as robustly as they expect it to be. This led to the second round of quantitative easing in November 2010. Slide 3: The Fed commenced QE2 and started buying another $600 billion of treasury. Once again, the market responded positively as seen from the increase in US share prices. Slide 4: This cycle repeats itself multiple times till today...
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...Gabriella Jackson "High saving promotes faster growth. So having more savers in the global economy should be good for our long run prosperity." Long-term economic growth is the expansion of the productive potential of an economy. Therefore, to ensure such growth, aggregate supply must continually shift outwards as shown in the diagram below. AS AS Price Level 1 2 P 1 P 2 AD Figure 1: Long-term economic growth 1 Real Gross Domestic Product Y Y 1 2 The diagram shows aggregate supply shifting outwards from AS to AS and consequently the price level falls from P to P and real gross domestic product rises from Y to Y . 1 1 1 2 2 2 Saving refers to the income of a household, firm or government that is not spent but set aside for future consumption or investment. It is vital to an economy because it provides finance for capital investment. Investment refers to the purchase of capital goods, which are used to aid further production, meaning the productive potential of the economy increases. Without such investment, aggregate supply and the productive potential of the economy would remain static. If this were to be accompanied by aggregate demand increasing at a fast pace, overheating in the economy would be the likely result. AS Price Level 1 P P 2 1 AD 1 Real Gross Domestic...
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...Executive Summary The Malaysian economy has been experiencing waves and waves of turmoil from multiple macroeconomics aspect for the past few years and it is no longer resilient as it used to be. There is no short cut to do a quick fix to our ailing economy and reviving it to a strong and sustainable growth path will require a long term effort. Therefore by understanding the factors that contributed to its demised will allow us to better evaluate if a particular approach to safe the economy is potentially viable or just another disastrous attempt. Thus, we have to meticulously examine every long term step that we take. The Factors According to Esther (2015a) one of the factors contributing to the fall of our economy is declining private consumption growth. Private consumption indicates the consumption of goods and services by households and it has been slowly declining over the past few years. Private consumption growth was at 8.2% in 2012, 7.2% in 2013 and drops back to 7.1% in 2014. The projection by Bank Negara for year 2015 is 6%. Consumers are holding back their spending during school holidays, festive seasons and yearend sales. This is mostly due to cautious spending by the consumers. Most of the retailers suffered a drop in their profit margin. Malaysia is still a resource-based country and the Government is heavily dependent on oil revenue. The country’s oil-related revenue is at RM63 billion in 2013, it accounts for 29.5% of the total government income. Falling...
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...General Certificate of Education Advanced Subsidiary Examination June 2014 Economics Unit 2 ECON2 The National Economy Wednesday 21 May 2014 1.30 pm to 2.45 pm For this paper you must have: an objective test answer sheet a black ball-point pen an AQA 12-page answer book. You may use a calculator. Time allowed 1 hour 15 minutes Section A (ECON2/1) Answer all questions on your objective test answer sheet. Use a black ball-point pen. Do not use pencil. Do all rough work in this question paper, not on your objective test answer sheet. Section B (ECON2/2) Answer EITHER Context 1 OR Context 2. Use black ink or black ball-point pen. Pencil should only be used for drawing. Write the information required on the front of your answer book. The Paper Reference is ECON2/2. Information The maximum mark for this paper is 75. There are 25 marks for Section A. Each question carries one mark. No deductions will be made for wrong answers. There are 50 marks for Section B. The marks for questions are shown in brackets. You will be marked on your ability to: – use good English – organise information clearly – use specialist vocabulary where appropriate. Advice You are advised to spend no more than 25 minutes on Section A and at least 50 minutes on Section B. G/TI/100665/Jun14/E3 ECON2 2 Section A: Objective Test Answer all questions in Section A. Each question carries 1 mark. No deductions will be made...
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...FROM CLASSICAL TO KENYESSIAN ECONOMICS Great Depression In the 1930s, American capitalism practically stopped working.For more than a decade, from 1929 to 1940, America's free-market economy failed to operate at a level that allowed most Americans to attain economic success. The depth economic collapse and social disarray that mired America then was unprecedented. * By 1933, the country's GNP had fallen to barely half its 1929 level12. * Industrial production fell by more than half, and construction of new industrial plants fell by more than 90%. Production of automobiles dropped by two-thirds; steel plants operated at 12% of capacity. * More than 13 million Americans lost their jobs. Of those, 62% found themselves out of work for longer than a year; 44% longer than two years; 24% longer than three years; and 11% longer than four years. Unemployment peaked at a staggering 24.1% in 1933. * The financial meltdown initiated by Wall Street's Great Crash of 1929 caused billions of dollars in assets to vanish into thin air. Wealthy Americans—who owned almost all the nation's stocks at the time—were walloped by an 80% decline in the value of the stock market. * Even more troubling to the entire population were rampant bank failures—between 1929 and 1933, two out of every five banks in America collapsed, causing more than $7 billion of their customers' hard-earned money to evaporate. Factors responsible The stock market crash of October of 1929. * The...
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...Balance Of Trade Difference in value over a period of time between a nation's imports and exports of goods and services. The balance of trade is part of a larger economic unit, the balance of payments, which includes all economic transactions between residents of one country and those of other countries. If a nation's exports exceed its imports, the nation has a favourable balance of trade, or a trade surplus. If imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists. Current United States Balance of Trade The United States reported a balance of trade deficit equivalent to 44 Billion USD in September of 2010. The United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world. Main exports are: machinery and equipment, industrial supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverages. U.S. imports non-auto consumer goods, fuels, production machinery and equipment, non-fuel industrial supplies, motor vehicles and parts, food, feed and beverages. Main trading partners are: Canada, European Union, Mexico, China and Japan. |Country |Interest Rate |Growth Rate |Inflation Rate |Jobless Rate |Current Account |Exchange Rate | [pic][pic][pic] |[pic][pic] to |[pic][pic] [pic] [pic][pic]...
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...the USSR? On Christmas Day on 1991,Mikhail Gorbachev resigned as the president of USSR and announced that USSR from then on was not going to existed anymore. Except the US president Reagan, very few people predict the collapse would happened. Evidences prove that the break-up of the USSR was intended and also out of Gorbachev’s expectations. After Brezhnev died. There were lots of problems left to Gorbachev. There were mainly two problems: Economy crippling and severe relationship with the US and eastern European countries.Gorbachev actually had a specific goal to improve USSR’s development by using Perestroika and Glasnost.However, those two police actually accelerated the coming of the fall. with an unintended consequences.However,there are also historian argues conversely that actually it is an intended result that the long-term economics crippling and stagnation caused the financial sustainability of USSR which directly influence people’s life situation and the USSR development. One of the Gorbachev’s policy Perestroika which was reconstruction on economy was one of the factor leads to fall of USSR which wasn't seen as a stimulant of the collapse by Gorbachev. By that time USSR saw its economic crippling. Gorbachev set up goals for ending the economic stagnation and improving the economy in USSR.Perestroika allowed more independent actions from various ministries and introduced market autonomy reforms.The goal of the perestroika was not to end the communism...
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...GDP, recession and unemployment have greatly affected Singapore economy. The article also focused on the nation behaviour of the declining economy for US and Greece due to finance crisis which in turn affect other nations, in this case, Singapore. In fact, the article briefly explained how aggregates like national income and output have affected US and Greece economy, which in turn affected Singapore. It will be further discussed whether this mentioned global crisis will affect Singapore inflation, causing a rise in unemployment rate and the slowing of GDP growth for emerging markets. Summary of the article The article comments on how two of Singapore’s trading partners, mainly US and Greece, are hurting themselves with their debt problems and the impact of their problems on Singapore economy. It briefly describes what US debt ceiling is and the heavy borrowing of Greek government which has greatly contributed to the global debt crisis. It also explains on US debt problem and other aftershocks if the debt ceiling is not rise. Moreover, it explains the debts that Greece had incurred and what will happen if Greece defaults on its debts. Lastly, it further highlighted that the Singapore economy is affected by the two countries’ debt problems. Identify and discuss on the economics concepts and models that will be suitable for analysing the news article Macroeconomics model is concerned either with the economy as a whole or with major aggregates such as national income and...
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...The exchange rate is the price of one currency in terms of another. A fall in the value of the pound is known as a depreciation and affects both the level of aggregate demand and the costs of production for firms in the UK economy. //One way in which a fall in the exchange rate can be beneficial for the UK economy is that it “should help UK exporters whose goods will be cheaper overseas”. An UK exports are priced in Sterling, and when Sterling can be purchased more cheaply, this makes our goods more affordable. An increased demand for UK exports is an injection into the UK economy and would serve to boost aggregate demand, enabling UK firms to make use of any spare capacity in order to increase output. This would also lead to a higher derived demand for resources, including labour, thus reducing unemployment. //A second effect of the depreciation on aggregate demand occurs because UK imports would become more expensive due to the fall in the purchasing power of Sterling. This should lead to reduced demand for imports and a reduction in the leakages from the UK circular flow of income. Overall, then, a fall in the exchange rate should boost exports and reduce imports and hence support aggregate demand and economic growth, as shown in the diagram. ///D A fall in the exchange rate could support economic growth by boosting AD I A negative effect of a fall in the exchange rate is that it may “add to inflationary pressures”. This is for two reasons. Firstly, the increase in aggregate...
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...Economics Paper Deborah Robinson University of Phoenix ECO365 Brad Bennett March 2, 2009 Introduction The following paper will define economics, microeconomics, and the law of supply and demand. The paper will identify the factors leading to a change in supply and a change in demand, and will also analyze the basis for the trends in consumption patterns discussed in the article “As US Shoppers Retreat, Can World Thrive?” The author of the paper will analyze the article by considering the utility derived from the products mentioned in the mentioned article, and will describe what has occurred to change the demand for, or the supply of, the good or service. The paper will then conclude with the market prices of the products or services. Define Economics Economics is the research and study of income, production, land, investments, taxes, government spending and labor. Economics is a study of how people choose to earn and spend their resources. The choice needs to be made individually by people and countries about what goods and services they can purchase and which ones they need to delay. Resources are scarce and are pushing people and countries to make choices. Economics is studied from two perspectives. The first being governments of nations seek to maximize the production of countries. This perspective is referred to as macroeconomics. The second perspective is of individuals and firms; this perspective is known as microeconomics. Define Microeconomics ...
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