Answer:
Yes, earning sensitivity will change in the long run
Explanation:
Earnings Sensitivity Analysis helps in determining the impact of an independent variable over a particular dependent variable based on various assumptions. This comparison on its own, measures changes in the long run.
This technique helps managers in determining the change in net interest income in correspondence to wide range of interest rates.
The repricing gap in the long term window will measure of the difference between the dollar value of assets that will reprice and the dollar value of liabilities that will reprice within a specific time period.
A possible implication is potential to receive a new interest rate.
The assets that could explain the positive reprising gap is Accounts payable and investments.
Two examples of Liabilities are: Short term loans and accounts payable.
Explanation:
Remember, inflation is scenario in an economy in which there occurs a constant rise in the prices of commodities/services in the market, which may lead to a reduction of the money in circulation.
Although, developing countries could use alternative approaches such as taxation or cutting down government expenditure, they do not use this but prefer "inflation solution" because it appears to be the easy way out.
Since, taxes are always lesser than required to run the economies of developing countries they (the government) may not use this approach.
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