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Thaaannkk yewwI will try my level best to help you out up to the extent, I have the knowledge and experience.
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Thaaannkk yewwI will try my level best to help you out up to the extent, I have the knowledge and experience.
For (a) we will first define the term unemployment .. then all the voluntary and involuntry (equilibrium/disequilibrium) unemployment (cyclical,real wage, frictional,structural,technological,seasonal,residual) with diagrams ...1. In 2006 it was reported that a country’s unemployment rate had remained steady
and that its central bank, through its interest rate policy, had prevented an increase in inflation despite a sharp rise in oil prices.
(a) Explain what might cause unemployment. [12]
(b) Discuss how interest rate policy might prevent a rise in inflation. [13]
welcome dear.Thaaannkk yeww
No dear. For A levels I teach only economics.Sir do you teach business studies ??
Its nice to see you effort. our concepts are very good. Your scheme for (a) is really very nice as we need to define the main terminology used question first then we go forward to hit the target. But as well as (b) is concerned you must explain the conflicts at the end. High Interest rate is the situation uncertain for consumers as now they will be more attracted towards saving and less borrowing and spending. due to this producers may stop producing as aggregate demand has fallen so producers may find unprofitable to produce and will try to sell more by reducing prices. This statement shows a conflict which arises due to changes in interest rate. First of all explain the extent to which interest rate policy is effective then come to the conflicts. Then conclusion. However, you have knowledge about things. Well done and keep this spirit up!For (a) we will first define the term unemployment .. then all the voluntary and involuntry (equilibrium/disequilibrium) unemployment (cyclical,real wage, frictional,structural,technological,seasonal,residual) with diagrams ...
For (b) Firstly explain the interest rate policy with diagram .. And also the link between these too .. (Can draw inflationary diagram and explain a bit )
High Interest rate is the situation uncertain for consumers as now they will be more attracted towards saving and less borrowing and spending. due to this producers may stop producing as aggregate demand has fallen so producers may find unprofitable to produce and will try to sell more by reducing prices. Due to High interest rates now as people borrow less money so they will invest less as well in this way the money supply will shrinkin order to equal the demand for money.
Increasing the Interest Rate will attract the hot money flows, possibly causing an appreciation in the exchange.
On the other hand by controlling inflation country may has to face the problem of unemployment , it may also add to the production cost, High Interest rate will discourage investment and hence long term growth and lastly attract hot-money flows, driving up the exchange rate- making exports uncompetitve and imports cheaper .
However interest rate policy can prevent the problem of inflation but had to face the ultimate conequence as well .
(Sir Is this ans right ??)
a) Definition - investment = purchase of capital goodsQ.2
(a) Explain the factors influencing the level of investment in an economy. [10]
(b) Discuss the extent to which national income is determined by private investment.
[15]
Q.2
(a) Explain the factors influencing the level of investment in an economy. [10]
(b) Discuss the extent to which national income is determined by private investment.
[15]
Ok good effort. Keep it up!a) Definition - investment = purchase of capital goods
Factors influencing level of investment:
-Demand factors
Expectation of the marginal returns from investment
Level of risks and uncertainty - inflation, exchange rate fluctuations, government policy
Accelerator - Level of output - increase, decrease or stay the same
-Accelerator coefficient - capacity, capacity of suppliers, technology and expectation
-Supply/cost factor
Interest rate - oppotunity cost of investment
Government's grants, tax exemption
b) definition of national income - net national product
define private Investment as a component of national income
Short run impact of private investment
-increases national income through multiplier and acccelerator
-cover depreciation and maintain potential output
Long run
-increase potential output and national output
-generate net income from investment in other countries
-Make domestic industries more developed and increase national income by increasing exports
But
-Private investment might not the the biggest component of national income (it depends on the economy)
-Investment might have less effect if accelerator coefficient and mpc are low.
Conclusion:
Investment is essential to achieve sustained growth in national income
In the short run, the investment has less effect on national income as expenditure on consumption of consumer good is switched to investment.
Thank you for the question
I hope my answer does answer the question
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