Economics, Accounting & Business: Post your doubts here!

[Crimson-Saint]

If you are referring to fiscal policy that is using govt expenditure and taxation, then it will influence inflation by influencing the level of demand in the economy.
Contractionary fiscal policy will reduce AD and thus help reduce level of inflation
Expansionary policy will increase AD and boots prices, increasing the level of inflation.

thaankx

 

[Sarah Paul]

Can anyone give me points for reasons against tariffs and explain them, 3 points

 

[Layla..]

Can anyone give me points for reasons against tariffs and explain them, 3 points

1) Domestic industries may rely on tarriffs as a means of protectionism from foreign competition and therefore be inefficient
2) It affects the Standard of Living of people in home country who now, will not be able to enjoy imported goods
3) It may provoke retaliation from other countries and they may charge high tariffs on exports

 

[Sarah Paul]

1) Domestic industries may rely on tarriffs as a means of protectionism from foreign competition and therefore be inefficient
2) It affects the Standard of Living of people in home country who now, will not be able to enjoy imported goods
3) It may provoke retaliation from other countries and they may charge high tariffs on exports

Can u explain the 3rd point ?

 

[Layla..]

Can u explain the 3rd point ?

When we charge tarrifs on imports, other countries we are trading with may also charge higher tarrifs on our exports that would be their imports.
For example, pakistan import Chinese toys, and china imports pakistani cloth
If Pak puts tarrifs on chinese toys let's say of 10% or so
China may retaliate and put tariffs on pakistani cotton too

 

[Sarah Paul]

When we charge tarrifs on imports, other countries we are trading with may also charge higher tarrifs on our exports that would be their imports.
For example, pakistan import Chinese toys, and china imports pakistani cloth
If Pak puts tarrifs on chinese toys let's say of 10% or so
China may retaliate and put tariffs on pakistani cotton too

Oh thanks sis

 

[Layla..]

Oh thanks sis

No Problem ^_^

 

[zainabkhann]

Hi I need help in understanding this

1) this is what my book says : for unanticipated inflation

There x a be an arbitrary redistribution of inxome. Borrowers tend to gain and lenders to lose, this is because nominal interest rates usually rise more slowly than the inflation rate, so real interest rates often fall with inflation. This is very much the case in many contries where interest rates have fallen to Zero per cent or thereabouts
. Income may also be transferered from the old to the you. As the former tend to be net savers while the latter tend to be net borrowers, this transfer so happens as state pensions are raised in line with inaction. They fall behind wages which usually rise at a faster rate than inflation


Please help me out with this especially the last line

 

[Layla..]

Hi I need help in understanding this

1) this is what my book says : for unanticipated inflation

There x a be an arbitrary redistribution of inxome. Borrowers tend to gain and lenders to lose, this is because nominal interest rates usually rise more slowly than the inflation rate, so real interest rates often fall with inflation. This is very much the case in many contries where interest rates have fallen to Zero per cent or thereabouts
. Income may also be transferered from the old to the you. As the former tend to be net savers while the latter tend to be net borrowers, this transfer so happens as state pensions are raised in line with inaction. They fall behind wages which usually rise at a faster rate than inflation


Please help me out with this especially the last line

I don't understand the first sentence!
I'll try explaining what comes next.
So it says nominal interest rates usually rise more slowly than the inflation rate , here the word nominal refers to money interest rate (i.e not inflation adjusted)! They rise slowly than the rate of inflation, for instance the rate of inflation increases by 5% and rate of money interest is 3% only, so this means that lenders are losing. They say interest rates have fallen to zero% in most countries. It does NOT mean that interest rates are 0%. It is referring to the real interest rate. The money interest rate may be 5%. 6% etc but it's the real interest rate which they are referring to has fallen to zero % due to inflation.
The last line what i think means: That old live on pensions whilst young people live on wages. So there may be increase in-or stability in real wage rate of people (possibly due to trade unions etc) whilst this may not be the case with penioners so, they fall behind wages! (I don't know if i'm explaining well.)
Also, they say that old income earners tend to be net savers (banks give interest on savings) whilst younger ones tend to be net borrowers (since borrowers gain at the expense of lenders), this proves that younger ones would benefit from inflation and old people will suffer
:/ Do I make any sense?

 

[rackstagryan]

Tarrif increases the price of imports and according to the law of demand, demand decreases as prices increase, thus it will lead to lower volume of imports!

you've got a point there! but what if the product imported had an inelastic demand? tariffs may reduce imports but not always yeah?

 

[Sarah Paul]

http://papers.xtremepapers.com/CIE/...d AS Level/Economics (9708)/9708_s08_ms_2.pdf
Can someone help me with 3b? Urgent pls

 

[ayushUcchil]

http://papers.xtremepapers.com/CIE/Cambridge International A and AS Level/Economics (9708)/9708_s08_ms_2.pdf
Can someone help me with 3b? Urgent pls

Widespread labor shortage can cause both cost-push and demand-pull inflation.
As labor becomes more and more scarce, firms will be forced to pay out higher wages in order acquire the labor.(Just like how the market behaves to a scarce good)
Increase in wage payments will cause the supply curve to shift to the left, causing an increase in the price. However, in the case where migrant labor is being used, this will not be an issue as migrant workers can simply be employed, solving the issue of labor shortage.
Labor shortage can allow us to draw a conclusion that most of the labor is already in employment and receiving increasing wages due to shortage. This means that consumers(Labor) have more spending power resulting in a higher aggregate demand and a higher supply of money in the economy. This will cause the demand curve to shift to the right(Increase in Income), resulting in higher prices(Demand-Pull Inflation).
I'm not too sure why Raw-Material costs would rise though.

 

[Sarah Paul]

Widespread labor shortage can cause both cost-push and demand-pull inflation.
As labor becomes more and more scarce, firms will be forced to pay out higher wages in order acquire the labor.(Just like how the market behaves to a scarce good)
Increase in wage payments will cause the supply curve to shift to the left, causing an increase in the price. However, in the case where migrant labor is being used, this will not be an issue as migrant workers can simply be employed, solving the issue of labor shortage.
Labor shortage can allow us to draw a conclusion that most of the labor is already in employment and receiving increasing wages due to shortage. This means that consumers(Labor) have more spending power resulting in a higher aggregate demand and a higher supply of money in the economy. This will cause the demand curve to shift to the right(Increase in Income), resulting in higher prices(Demand-Pull Inflation).
I'm not too sure why Raw-Material costs would rise though.

Thanks

 

[Layla..]

you've got a point there! but what if the product imported had an inelastic demand? tariffs may reduce imports but not always yeah?

Yeah, that is an exception! :3

 

[Sarah Paul]

when a tax is imposed the consumer surplus decreses isnt it?

 

[Layla..]

when a tax is imposed the consumer surplus decreses isnt it?

Yes! Consumer surplus is shown by the area under the demand curve and above the equilibrium price. Increased taxes will shift the demand curve to the left which will therefore reduce the consumer surplus.
Refer to the diagram below on the left for further understandin

 

[Rishabh195]

accounting paper 32
doubt in ques 27

 

[Hasa321]

http://papers.xtremepapers.com/CIE/... AS Level/Accounting (9706)/9706_s08_qp_3.pdf

hw to do question 26, 27, 29 and 30?

 

[kishmishdoll]

economics Mayjune 2009 paper 2:
can anyone plz help me with question number b i) ???
how to do this? answer for that is $10million surplus..

 

[ayushUcchil]

economics Mayjune 2009 paper 2:
can anyone plz help me with question number b i) ???
how to do this? answer for that is $10million surplus..

Basically, they've given us the predicted surplus for 2006 as $17 Billion and said that it is two thirds higher than 2005.
We could apply a little bit of math year and achieve a quick and easy solution.
So we assume the initial surplus in 2005 as "1"
The initial surplus is taken a term 'x'
We know that the 17 Billion is 2/3(0.667) times higher than the initial surplus, so 17 billion will equal the initial surplus +1 ( 1+1.667)
Basically;
1.667 : 1700,000,000
1 : x
We then cross multiply;
1700,000,000 * 1= 1.667x
divide 1700,000,000 by 1.667 and we get the answer as 1019,796,041 i.e. rounded to 10 Billion

I'm sorry if my explanation makes no sense, but this is the only way that I know how to do! :S
Hope I'e conveyed it understandably