Eps Case Study

Topics: Inflation / Pages: 4 (912 words) / Published: Aug 20th, 2013
EPS Assignment

1. Definition: Goods should have the same price in different countries when expressed in same currency
Purchasing Power Parity is used to determine the adjustments that are required in the exchange rate such that when a good is brought in a country, its price should be the same when expressed in the same currency.
For a common man, it gives a clear picture of the degree to which the value of currency has increased or decreased when compared to other countries currency.
Ex: An example of this would be: when we do online shopping many a times we see the prices of goods expressed in dollars but what we have to pay actually is the rupee equivalent of the dollar in order to buy that product.
Explain the term “Purchase Power Parity” with a suitable example

2. Assuming all other factors remaining constant, what will be the effect of increase in Repo rate by RBI on: a. Loans given by banks to consumers b. Deposits taken by banks from consumers c. GDP of the India d. Inflation rate of India
Explain with proper reasoning
When the repo rate increases, bank has to pay more interest to the central banks which leave the bank with less money. Money flow in the market also decreases
In such a situation following will be the outcomes a- Interest of the loans given by bank to the consumers will also increase b- Bank increases the deposit rate to attract consumers to deposit their money into bank, this will allow bank to fill the hole created in their account due to increased repo rate c- Since increase in repo rate takes away the money from the market, money circulation in the market will decrease hence, the GDP of a country will also decrease d- Inflation can be controlled from rising as people will have less money to spend on goods and services they want to enjoy.

3. Write a short note on the disaster (flood) in Uttarakhand. Highlight major facts, reasons & consequences.
The flood in

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