Differentiate between Rational and Adaptive Expectations and clearly explain their role in focusing on future macro-economic variables 1. Rational Expectations The theory of rational expectations was first proposed by John F. Muth of Indiana University in the early 1960s. He used the term to describe the many economic situations in which the outcome depends partly on what people expect to happen. Rational expectations theory is an assumption in a model that the agent under study uses a forecasting
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Unemployment: Introduction: Unemployment (or joblessness) occurs when people are without work and actively seeking work. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession‚ an economy usually experiences a relatively high unemployment rate. In a 2011 news story‚ Business Week reported‚ "More than 200 million people globally
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In our mixed economy‚ there is a need for regulation and intervention on interest rates and the general level of economic activity. Australia’s current healthy economy has been developed partly through the functions of the Reserve Bank of Australia (RBA). Their functions include; conducting monetary policy‚ acting as a banker to the government‚ settling transactions between banks‚ and ensuring financial stability. The priority function of the RBA is conducting monetary policy. It is an action designed
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points) My family pays for a housekeeper and landscapers. 4. One of the functions of money is as a store of value. How does inflation affect money’s ability to store value? (3-6 sentences. 2.0 points) Inflation is a sign of a weak economy. It decreases the value of money over time‚ so you can’t get as much for your money as you could in the past. If inflation increases‚ it makes more sense to invest in things that are likely to increase in value. 5. Imagine that you are considering moving
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Scenario: Your manager wants you to create a visual aid for the Directors’ Annual Report which you will then present. She has asked you need to create either a poster/picture/spider diagram/flow diagram which describes the influence of the two contrasting economic environments (for Jaguar this would be India and the UK) on the business activities. (P5) You will also need to compare the challenges faced by Jaguar within these economic environments (M2) P5 Uk- Jaguar has different economic environments
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rates were increased by 25 basis points as a measure to control increasing inflation. High crude oil prices along with increasing domestic demand had driven up prices‚ and hence the interest rates were increased as a regulatory measure. The repo rate was increased by 100 basis points the next year to 7.25% and the Cash Reserve Ratio was increased from 5 to 5.5. These monetary measures were in response to rising inflation. The CRR was increased significantly to 7.5 in 2007 due to increased money
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PIZZA HUT IN BRAZIL Question 2 1. Should Pizza Hut put more of its efforts in expanding in Brazil or somewhere in South East Asia? Why? 1.1 We shall respond to this question through a high level analysis of Pizza Hut’s respective business environment in Brazil and in South East Asia. 1.2 The business environment is the aggregate of all conditions‚ events‚ and influences that affect a company’s operations. It includes customers‚ competitors‚ stakeholders‚ suppliers‚ industry trends‚ regulations
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reflected the existence of a positive relationship between the increase of money supply and the level of inflation. Generally‚ this is reflected by the continued rise of prices of the various products. A situation ensues where excess amounts of money tend to be chasing too few goods. In this perspective‚ this study tested on whether monetary policy is an effective tool in the combating of inflation and ensuring price stability. The first and foremost objective of the
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Fall of the rupee: Impact on inflation and Loans By‚ Praveen.G.C Rohith.K.S Sandeep.A What 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 India Inflation Rate The inflation rate in India was recorded at 4.70 percent in May of 2013. Inflation Rate in India is reported by the Ministry of Commerce and Industry
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In economics‚ inflation is a rise in the general level of prices of goods and services in an economy over a period of time.[1] When the general price level rises‚ each unit of currency buys fewer goods and services. Consequently‚ inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.[2][3] . Positive effects include ensuring that central banks can adjust real interest rates (to mitigate recessions)
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