Cost-push inflation is a situation in which the:
1 answer:
Answer: b. short-run aggregate supply curve shifts leftward.
Explanation:
Cost Push Inflation occurs when the Aggregate Supply of Goods and Services DECREASES because of an increase in Production costs.
Companies can no longer keep producing at the previous levels they could have because the price of inputs have gone up and they are already at full capacity.
To maintain profit margins they will reduce production to cut costs.
This reduces the supply in the Market and forces the Supply curve left which leads to a higher equilibrium price all else being equal.
In the graph I attached below, you can see how the Short Run aggregate supply curve shifted to the left and took prices up as Demand remained constant.
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Answer:
Required rate of return= 14.8
If the security is expected to return 15%, it is underpriced.
Explanation:
The required rate of return on the security can be calculated using the CAPM formula which states that
Required rate of return =rf + B(rm - rf)
where rf= risk free rate
B= beta of the security
rm = return on the market
Required rate of return = = 14.68%
If the security is expected to return 15%, it is underpriced, and is a good investment. Discounting the expected cash-flows from the security at this higher expected return of 15% is going to yield a lower price compared to what the investor is prepared to pay given his required rate of return of 14.68%.
Answer: c) between Qa and Qb
Explanation:
From the exhibit, the lowest cost will be recorded when output is between Qa and Qb because these points represent the lowest costs per unit for Curves A and C and the lowest points where output can be produced. Output being produced at costs lower than this is therefore the lowest for the medium plant.
