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Economics, Accounting & Business: Post your doubts here!

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Saiyan said :
A- Untrue, money supply don't affect the speculative demand, it is an idle balance and it is interest elastic. Yes the interest has reduced but this question is related to money supply not interest.
B- Price will rather increase according to monetarists.
C-The price of govt bond will rather increase
D- The velocity of circulation of money will decrease due to the view of keynesians they say that the money supply does not affect inflation as it has been stabilised by the desire to hold money. In short run it is said that people will not be able to allocate their expenditure in short run therefore they save and the velocity of money reduces.

THANKS! but i still feel that A can be right! because idle balances are interest inelastic!
 
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You have to use the elimination technique for answering this.
A- Untrue, money supply don't affect the speculative demand, it is an idle balance and it is interest elastic. Yes the interest has reduced but this question is related to money supply not interest.
B- Price will rather increase according to monetarists.
C-The price of govt bond will rather increase
D- The velocity of circulation of money will decrease due to the view of keynesians they say that the money supply does not affect inflation as it has been stabilised by the desire to hold money. In short run it is said that people will not be able to allocate their expenditure in short run therefore they save and the velocity of money reduces.
answered by Saiyan
 
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Purchasing Power Parity Anyone??

A country that commits itself to maintaining a fixed parity for its currency will effectively lose control over interest rate determination. That does not mean that it will no longer be able to have its own ‘independent’ central bank. What it does mean is that the interest rates set by the bank will be governed by the foreign exchange markets.
 
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You have to use the elimination technique for answering this.
A- Untrue, money supply don't affect the speculative demand, it is an idle balance and it is interest elastic. Yes the interest has reduced but this question is related to money supply not interest.
B- Price will rather increase according to monetarists.
C-The price of govt bond will rather increase
D- The velocity of circulation of money will decrease due to the view of keynesians they say that the money supply does not affect inflation as it has been stabilised by the desire to hold money. In short run it is said that people will not be able to allocate their expenditure in short run therefore they save and the velocity of money reduces.
answered by Saiyan

thankz! :)
 
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THANKS! but i still feel that A can be right! because idle balances are interest inelastic!

No my friend. This is a common mistakes by many students. Just go to the CIE Economics books by Colin Bramford, speculative demand is in fact an idle balance and it is interest elastic. Remember this way idle balances are not affected by anything except interest. Precautionary and Transactionary are inelastic and are active as they are affected by all things except interest.
 
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No my friend. This is a common mistakes by many students. Just go to the CIE Economics books by Colin Bramford, speculative demand is in fact an idle balance and it is interest elastic. Remember this way idle balances are not affected by anything except interest. Precautionary and Transactionary are inelastic and are active as they are affected by all things except interest.

Thankz alot! i understood perfectly! :)
 
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You guys can take help from Sir Qamar if u need.. he explains well and he is helping us a lot Qamar Baloch
He is answering our questions check the group discussin Economic P4 Guess Paper he is there to help us out.. :)
 
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A country that commits itself to maintaining a fixed parity for its currency will effectively lose control over interest rate determination. That does not mean that it will no longer be able to have its own ‘independent’ central bank. What it does mean is that the interest rates set by the bank will be governed by the foreign exchange markets.
so it has to set interest rates that will keep its currency at the ppp level?
 
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Finally! Someone came up with a question. You need to remember that I firm does not change its production process due to internal factor. The thing is that C is an internal factor and you may not know labour productivity may be increased due to better usage of capital. If the cost of capital which is also the interest rate increases firms are forced to employ more labour than capital if it does not have the sufficient money to finance it.
Ohkay its look like im gonna fail my eco paper..
Tell me
the relationship between MC AVC AFC AV of market structures and how they react with cost to increase or decrease output
How a firm sees is MRP curve and how it reduces the demand of MRP
How Productive and Allocative efficiency occurs in market structures..
just help in micro otherwise im gonna fail :|
I need a complete explanation
 
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