1. Fiscal policy - This policy is based on demand management in terms of either raising or lowering the level of aggregate demand. The government could attempt to influence many of the components [C + I + G + (X – M)] of the aggregate demand by reducing government expenditure and raising taxes. This policy is effective only against demand - pull inflation.
2. Monetary policy - For many years monetary policy was seen as only supplementary to fiscal policy. Neo-keysians content that monetary policy works through the rate of interest while monetarists? viewpoint is to control money supply through setting targets for monetary growth. This can be achieved through what is known as the Medium term financial strategy (MTFs) which aims at gradually reducing the growth of money in line with the growth of real economy - the use of monetary policy instruments such as the bank rate, open market operations (omo), variable reserve requirement (cash & liquidity ratios)
3. Direct Intervention (prices and incomes policy) – Direct intervention involves fixing wages and prices to ensure there is almost equal rise in wages and other incomes alongside the improvement in economic productivity. Nevertheless, these policies become successful for a short period as they end up storing more trouble in future, since once relaxed will lead to frequent price increases and wage fluctuation. Like direct intervention, fiscal and monetary policies may fail if it is relied upon as the only means of controlling inflation, and that what is needed is an element of policy combination.
Wilfykil answered the question on February 7, 2019 at 07:10
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what is the effect of high and rising inflationary rate on the rate of interest?
(Solved)
what is the effect of high and rising inflationary rate on the rate of interest?
Date posted:
February 7, 2019
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Define the term hyperinflation.
(Solved)
Define the term hyperinflation.
Date posted:
February 7, 2019
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What are the determinants of demand for labor?
(Solved)
What are the determinants of demand for labor?
Date posted:
February 7, 2019
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By use of diagrams, illustrate and explain the resultant changes on the equilibrium price and quantity from a simultaneous fall in price of a substitute...
(Solved)
By use of diagrams, illustrate and explain the resultant changes on the equilibrium price and quantity from a simultaneous fall in price of a substitute and an increase in the cost of raw materials for a specific commodity.
Date posted:
February 7, 2019
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Answers (1)
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Bring out the salient features of a monopoly market model.
(Solved)
Bring out the salient features of a monopoly market model.
Date posted:
February 7, 2019
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A monopolistic firm with a linear demand curve finds that it can sell two units at Sh.12 or twelve units at Sh.2. Its fixed cost...
(Solved)
A monopolistic firm with a linear demand curve finds that it can sell two units at Sh.12 or twelve units at Sh.2. Its fixed cost is Sh. 20 and its marginal cost is constant at Sh. 3 per unit. Derive and plot the following:
Marginal cost, average total cost, marginal revenue and demand curves for this firm.
Date posted:
February 7, 2019
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Illustrate and explain the three stages associated with the law of variable proportions
(Solved)
Illustrate and explain the three stages associated with the law of variable proportions
Date posted:
February 7, 2019
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Argue for and against international trade restrictions.
(Solved)
Argue for and against international trade restrictions.
Date posted:
February 7, 2019
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Distinguish between a tariff and a quota as applied in International Trade.
(Solved)
Distinguish between a tariff and a quota as applied in International Trade.
Date posted:
February 7, 2019
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Answers (1)
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Under what conditions is price discrimination possible?
(Solved)
Under what conditions is price discrimination possible?
Date posted:
February 7, 2019
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Answers (1)
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You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits....
(Solved)
You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits. This firm is a monopolist which sells in two distinct markets, one of
which is completely sealed off from the other.
As part of the analysis, you establish that the total demand for the firm‟s output is given by the
following equation:
Q = 50 – 0.5P
and the demand for the firm‟s output in the two markets is given by the following equations:
Q1 = 32 – 0.4P1 and
Q2 = 18 – 0.1 P2
Where: Q = total output
P = Price
Q1 = Output sold in Market 1
Q2 = Output sold in Market 2
P1 = Price charged in Market 1
P2 = Price charged in Market 2
The cost of production is given by C = 50 + 40Q
Where C = total cost of producing bread.
How much profit would the firm earn if it sold the output at a single price, and if it discriminates?
Date posted:
February 7, 2019
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Answers (1)
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You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits....
(Solved)
You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits. This firm is a monopolist which sells in two distinct markets, one of
which is completely sealed off from the other.
As part of the analysis, you establish that the total demand for the firm‟s output is given by the
following equation:
Q = 50 – 0.5P
and the demand for the firm‟s output in the two markets is given by the following equations:
Q1 = 32 – 0.4P1 and
Q2 = 18 – 0.1 P2
Where: Q = total output
P = Price
Q1 = Output sold in Market 1
Q2 = Output sold in Market 2
P1 = Price charged in Market 1
P2 = Price charged in Market 2
The cost of production is given by C = 50 + 40Q
Where C = total cost of producing bread.
What price must be charged in each market in order to maximize profits?
Date posted:
February 7, 2019
.
Answers (1)
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You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits....
(Solved)
You have been hired as a consultant by a firm producing bread to advise on a pricing strategy that would
enable the firm to maximize profits. This firm is a monopolist which sells in two distinct markets, one of
which is completely sealed off from the other.
As part of the analysis, you establish that the total demand for the firm‟s output is given by the
following equation:
Q = 50 – 0.5P
and the demand for the firm‟s output in the two markets is given by the following equations:
Q1 = 32 – 0.4P1 and
Q2 = 18 – 0.1 P2
Where: Q = total output
P = Price
Q1 = Output sold in Market 1
Q2 = Output sold in Market 2
P1 = Price charged in Market 1
P2 = Price charged in Market 2
The cost of production is given by C = 50 + 40Q
Where C = total cost of producing bread.
Determine the total output that the firm must produce in order to maximize profits.
Date posted:
February 7, 2019
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Answers (1)
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Given a hypothetical consumption function of the form:
C = a + bYd
Where Yd = Y – T
And Y = Income
...
(Solved)
Given a hypothetical consumption function of the form:
C = a + bYd
Where Yd = Y – T
And Y = Income
T = Taxes and that:
Government spending and investment are exogenously determined at G and I respectively: Determine Government Spending
Multiplier.
Date posted:
February 7, 2019
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Answers (1)
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What is the relationship between the simple multiplier and marginal propensity to consume?
(Solved)
What is the relationship between the simple multiplier and marginal propensity to consume?
Date posted:
February 7, 2019
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Answers (1)
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Based on the circular flow of income analysis, explain why marginal propensity to consumer
plus marginal propensity to save equals one.
(Solved)
Based on the circular flow of income analysis, explain why marginal propensity to consumer
plus marginal propensity to save equals one.
Date posted:
February 7, 2019
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Answers (1)
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Explain how the concept of elasticity guides decisions in price discrimination by a monopolist
(Solved)
Explain how the concept of elasticity guides decisions in price discrimination by a monopolist
Date posted:
February 6, 2019
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Answers (1)
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Explain how the concept of elasticity guides decisions in devaluation policy to encourage exports and discourage imports
(Solved)
Explain how the concept of elasticity guides decisions in devaluation policy to encourage exports and discourage imports
Date posted:
February 6, 2019
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Answers (1)
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Explain how the concept of elasticity guides decisions in government?s tax policy on household consumption
(Solved)
Explain how the concept of elasticity guides decisions in government‟s tax policy on household consumption
Date posted:
February 6, 2019
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Answers (1)
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In a certain economy the marginal propensity to save is 0.2 and the autonomous consumption equals
400. If the Government?s expenditures were to increase by 50%...
(Solved)
In a certain economy the marginal propensity to save is 0.2 and the autonomous consumption equals
400. If the Government‟s expenditures were to increase by 50% what would be the resultant change in National income.
Date posted:
February 6, 2019
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Answers (1)