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Will an increase in inflation have a larger impact on the price of a bond or preferred stock?
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∙ 12y ago
The preferred stock
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∙ 12y ago
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Advantage of inflation in India's economy?
Inflation is the sustained increase in price level. It usually has negative aspects to inflation, but it has some positive effects as well. Firstly, inflation is more desirable than deflation in most situations. This does not include hyper inflation by the way. Secondly, inflation shows economic growth, or at least it reflects some economic activity. The major positive aspect is that it helps smaller firms grow to larger firms. Assuming that both firms A and B sells similar goods. A is a large cooperation with economies of scales and B a smaller firm without economies of scale. Therefore the prices of goods A would be less than good B. Assuming that the inflation rate is 10%. The price of good A is $9 and inflation causes it to increase to $9.90. And for good B, since the cost of production is higher, it costs $10. And with inflation pushing it up to $11. The proportion of increase is similar, but the real price increase is different, firm A $0.90 and firm B $1. Thus firm B having a $0.10 increased revenue more than firm A. Resulting in a larger benefit, ceteris peribus cost of production does not increase in proportion and other factors equalized.
What is it called when it takes more money to buy the same goods?
A price increase caused by a larger currency supply is called inflation. If the supply of the goods remains the same, the result is a higher price, in effect devaluing the money.
What is the relationship between current account deficit and inflation management in India?
The larger the deficit the more inflation there will be. The government will print more money in the hopes of being able to get out of the deficit easier.
What economic impact did the war of Vietnam have on the US?
Larger defense budget.
What are the favourable effects of inflation?
A+= Money loses its valueWhat is Inflation . Inflation is a rise in the general price level and is reported in rates of change. Essentially what this means is that the value of your money is going down and it takes more money to buy things. Therefore a 4% inflation rate means that the price level for that given year has risen 4% from a certain measuring year (currently 1982 is used). The inflation rate is determined by finding the difference between price levels for the current year and previous given year. The answer is then divided by the given year and then multiplied by 100. To measure the price level, economists select a variety of goods and construct a price index such as the consumer price index (CPI). By using the CPI, which measures the price changes, the inflation rate can be calculated. This is done by dividing the CPI by the beginning price level and then multiplying the result by 100. Causes of Inflation There are several reasons as to why an economy can experience inflation. One explanation is the demand-pull theory, which states that all sectors in the economy try to buy more than the economy can produce. Shortages are then created and merchants lose business. To compensate, some merchants raise their prices. Others don't offer discounts or sales. In the end, the price level rises. A second explanation involves the deficit of the federal government. If the Federal Reserve System expands the money supply to keep the interest rate down, the federal deficit can contribute to inflation. If the debt is not monetized, some borrowers will be crowded out if interest rates rise. This results in the federal deficit having more of an impact on output and employment than on the price level. A third reason involves the cost-push theory which states that labor groups cause inflation. If a strong union wins a large wage contract, it forces producers to raise their prices in order to compensate for the increase in salaries they have to pay. The fourth explanation is the wage-price spiral which states that no single group is to blame for inflation. Higher prices force workers to ask for higher wages. If they get their way, then producers try to recover with higher prices. Basically, if either side tries to increase its position with a larger price hike, the rate of inflation continues to rise. Finally, another reason for inflation is excessive monetary growth. When any extra money is created, it will increase some group's buying power. When this money is spent, it will cause a demand-pull effect that drives up prices. For inflation to continue, the money supply must grow faster than the real GDP. Effects of Inflation The most immediate effects of inflation are the decreased purchasing power of the dollar and its depreciation. Depreciation is especially hard on retired people with fixed incomes because their money buys a little less each month. Those not on fixed incomes are more able to cope because they can simply increase their fees. A second destablizling effect is that inflation can cause consumers and investors to changer their speeding habits. When inflation occurs, people tend to spend less meaning that factories have to lay off workers because of a decline in orders. A third destabilizing effect of inflation is that some people choose to speculate heavily in an attempt to take advantage of the higher price level. Because some of the purchases are high-risk investments, spending is diverted from the normal channels and some structural unemployment may take place. Finally, inflation alters the distribution of income. Lenders are generally hurt more than borrowers during long inflationary periods which means that loans made earlier are repaid later in inflated dollars.
What does the term inflation mean?
The term inflation has a few different but related meanings. If you blow air into a balloon you are inflating it, making it expand. That is a kind of inflation. The term is also used in economics to describe a general increase in prices and wages, which is equivalent to a decrease in the value of a unit of currency (such as a dollar). Prices get larger, so they are said to be inflating. If they get lower, that can be called deflation.
Advantage of inflation in India's economy?
Inflation is the sustained increase in price level. It usually has negative aspects to inflation, but it has some positive effects as well. Firstly, inflation is more desirable than deflation in most situations. This does not include hyper inflation by the way. Secondly, inflation shows economic growth, or at least it reflects some economic activity. The major positive aspect is that it helps smaller firms grow to larger firms. Assuming that both firms A and B sells similar goods. A is a large cooperation with economies of scales and B a smaller firm without economies of scale. Therefore the prices of goods A would be less than good B. Assuming that the inflation rate is 10%. The price of good A is $9 and inflation causes it to increase to $9.90. And for good B, since the cost of production is higher, it costs $10. And with inflation pushing it up to $11. The proportion of increase is similar, but the real price increase is different, firm A $0.90 and firm B $1. Thus firm B having a $0.10 increased revenue more than firm A. Resulting in a larger benefit, ceteris peribus cost of production does not increase in proportion and other factors equalized.
What is it called when it takes more money to buy the same goods?
A price increase caused by a larger currency supply is called inflation. If the supply of the goods remains the same, the result is a higher price, in effect devaluing the money.
Why does the downward motion and sudden stop of the hammer tighten the hammer head?
It has to do with impulsive force. F = (mv-mu)/t when you reduce the time of impact, you get a larger force. That is why the sudden stop of the hammer is to reduce time of impact, and increase force applied.
What is the relationship between current account deficit and inflation management in India?
The larger the deficit the more inflation there will be. The government will print more money in the hopes of being able to get out of the deficit easier.
How do viruses not impact larger organism?
Population control
Equation for a circle centered at the origin should one increase to make a circle larger?
Yes, increase the constant term to make the circle larger.
What does it mean to substantially increase?
To increase is to get larger, to have more of something. A substantial increase is an increase that is large enough to matter in some way.
How do you increase the force of gravity?
By moving to a larger planet.
How correlation differs from causeation?
Correlation means that when one quantity increases, the other tends to increase as well. Causation means that the increase in one quantity CAUSES an increase in another quantity. It is a common error to assume that correlation implies causation; sometimes correlation is caused by causation, but not always. For example: let's say that the price of sugar gradually went up over the last 10 years; so did the price of cooking oil. Neither one is caused by the increase of the other; rather, they are both part of a larger tendency, namely, inflation. As another example, during the same 10-year period, the population of your country gradually increased. This is independent of the inflation; both prices and population simply tend to increase over time.
What is the difference between rise raise increase and grow?
Rise means to move upwards. Raise means to increase the level of something. Increase means to become larger in amount. Grow means expanding or becoming larger in size.
What economic impact did the war of Vietnam have on the US?
Larger defense budget.
