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Economics, Accounting & Business: Post your doubts here!

M

MnMz

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Arpit Farkya said:
The answer for qno. 24 is (A), but I didn't understand the logic behind it. As the inflation rate falls from 10% to 6% that means the general price level falls hence why the answer says that the cost of living would increase? according to the law the cost of living should also fall. please help me by explaining it.
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The relationship between cost of living and inflation is the manner in which increases in the price of goods and commodities affect a previously established table of the cost of living in a particular area or country under consideration.

Eg: Assume Adam lives in London and earns 4,000 sterling pounds per month with a calculated cost of living that amounts to about 3,000 sterling pounds per month. An increase in prices caused by inflation will affect the cost of living for Adam by causing the prices of commodities to increase, meaning he has to spend more than 3,000 sterling pounds a month if he wants to maintain his current standard of living. This means that the inflation will reduce the value of his monthly wages in relation to what it can purchase to maintain his standard of living. As such, Adam will probably have to spend as much as 3,500 sterling pounds per month as his cost of living.

Did you get it??
 
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Arpit Farkya

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MnMz said:
The relationship between cost of living and inflation is the manner in which increases in the price of goods and commodities affect a previously established table of the cost of living in a particular area or country under consideration.

Eg: Assume Adam lives in London and earns 4,000 sterling pounds per month with a calculated cost of living that amounts to about 3,000 sterling pounds per month. An increase in prices caused by inflation will affect the cost of living for Adam by causing the prices of commodities to increase, meaning he has to spend more than 3,000 sterling pounds a month if he wants to maintain his current standard of living. This means that the inflation will reduce the value of his monthly wages in relation to what it can purchase to maintain his standard of living. As such, Adam will probably have to spend as much as 3,500 sterling pounds per month as his cost of living.

Did you get it??
Click to expand...

my understanding from your answer: Your answer indiactes that due to inflation in the cost of living will rise.
This also indicates that the cost of living should fall because of reduction in inflation rate. ( from 10% to 6%). Hence if the inflation falls the cost of living should fall.

I didn't get it.
 
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MnMz

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Arpit Farkya said:
my understanding from your answer: Your answer indiactes that due to inflation in the cost of living will rise.
This also indicates that the cost of living should fall because of reduction in inflation rate. ( from 10% to 6%). Hence if the inflation falls the cost of living should fall.

I didn't get it.
Click to expand...

Inflation means that prices are rising. A fall in inflation means that prices are still rising year on year, but at a slower rate.
Like if you draw a graph, you would see how the graph become less steeper as inflation falls doesn't mean that there is no inflation, it is just that the prices are increasing at a slower rate.

Get it?
 
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Arpit Farkya

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MnMz said:
20. Terms of trade(TOT) = (index of export/index of import)%
In the current year, index of export is 120.
this gives, index of import = 120/(150/100)=80
Since base year, the price of imports decreased by 20%.
Ans: -20% , B

24. A falling rate of inflation will still cause an increase in the cost of living. (A)

25. B.O.T will improve because the exports of the UK will increase. However, the current balance remains uncertain because it depends whether the Japanese send profit back home or no. (Ans. B)
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tanx a lot for helping me. Finally i got it.
 
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zainabkhann

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Guys will this be considered 1 mark or 2 marks in a question with a command word : Compare or Explain, Describe etc
Describe the differences between private and public limited companies

Private limited companies do not offer shares to the general public therefore cannot raise additional capital by sale of shares. Whereas public limited companies do provide the opportunity to buy/sell shares to the public which is another source of generating capital hence encourgaes shareholders/lenders to invest in plcs.

will this count as 1 mark or 2? Because i think it will be considerd 1 mark as a whole because ive talked about one part (the availability of shares) in both public and private limited companies. Please let me know so i can write my other points according to that
 
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zainabkhann said:
Guys will this be considered 1 mark or 2 marks in a question with a command word : Compare or Explain, Describe etc
Describe the differences between private and public limited companies

Private limited companies do not offer shares to the general public therefore cannot raise additional capital by sale of shares. Whereas public limited companies do provide the opportunity to buy/sell shares to the public which is another source of generating capital hence encourgaes shareholders/lenders to invest in plcs.

will this count as 1 mark or 2? Because i think it will be considerd 1 mark as a whole because ive talked about one part (the availability of shares) in both public and private limited companies. Please let me know so i can write my other points according to that
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the shareholders of the private limited companies are often the members of the same family or friends.
 
student92

student92

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abcde said:
Can someone offer an explanation for Q24 here:
http://papers.xtremepapers.com/CIE/Cambridge International A and AS Level/Economics (9708)/9708_w03_qp_3.pdf
It's called "the hardest question of the year" in the er. Lets resolve this! :)
Why is C the correct answer?
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the answer is c,
this is because when the government takes a loan from the public, the liquid assets which the commercial banks hold will be the same.
as the people withdraw money from banks to purchase the bonds, the banks liquid assets fall, on the other hand, when the government spends the money it borrowed, it will pay govt workes salaries , govt purchases etc, that liquid money wil again come back to the public, which will be stored in commercial banks
it must be noted that the money supply is increasd by 3 ways, 1 credit creation by banks, 2 currency flows from from forign sector 3 deficit financing ( only when borrowing from non public )
banks can only create money when they have liquid assets, and if the govt borows from the public, there would be no increase in liquid assets. thus no incerse on money supply
hope you can understand !
 
Sarkerms

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I am really in need of the oct/nov 2012 accounting p21. Can anyone provide me a link or a copy?
 
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MnMz

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Fernando Torres said:
can i use the books in o level papers for pakistan and do they contain all the chapters of accountings which are in the syllabus which will get me an A
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They have everything that you need for an A*
All you need is to keep practicing past papers...like really good!
and being clear with all the concepts! :)

and you will get an A* InshAllah :)
 
abcde

abcde

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student92 said:
the answer is c,
this is because when the government takes a loan from the public, the liquid assets which the commercial banks hold will be the same.
as the people withdraw money from banks to purchase the bonds, the banks liquid assets fall, on the other hand, when the government spends the money it borrowed, it will pay govt workes salaries , govt purchases etc, that liquid money wil again come back to the public, which will be stored in commercial banks
it must be noted that the money supply is increasd by 3 ways, 1 credit creation by banks, 2 currency flows from from forign sector 3 deficit financing ( only when borrowing from non public )
banks can only create money when they have liquid assets, and if the govt borows from the public, there would be no increase in liquid assets. thus no incerse on money supply
hope you can understand !
Click to expand...
Thank you. That was helpful. :)

Here's another question for all. (J/03/3/04)

4. A given production process uses both labor and capital. What will be the effect on the quantities of labor and capital employed if the govt. introduces a subsidy on capital investment?

C. Quantity of labour decreases, capital increases
D. Quantity of labour is unchanged, capital increases.

Why is it D and not C? Any help would be appreciated.
 
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MnMz

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abcde said:
Thank you. That was helpful. :)

Here's another question for all. (J/03/3/04)

4. A given production process uses both labor and capital. What will be the effect on the quantities of labor and capital employed if the govt. introduces a subsidy on capital investment?

C. Quantity of labour decreases, capital increases
D. Quantity of labour is unchanged, capital increases.

Why is it D and not C? Any help would be appreciated.
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There is no reason for the labor to decrease at least they didn't give any reason for a decrease to happen, since the extra capital employed is being subsidized.
 
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