All categories

2 years ago

(a) Explain the quantity theory and (b) how does the theory explains the cause of inflation

Business

1 answer:

Digiron [165]2 years ago

8 0

Answer:

The quantity theory of money defends that the money supply has a determining influence on the price level, that is, that the quantity of circulating money will necessarily be imputed to the value of the quantity of commercial operations that are carried out.

Therefore, this theory establishes that the creation of money without increasing the commercial volume (the total amount of tradable goods) will lead to inflation, since it is not really increasing the economic value of an economy, but only the money supply of it, which is "empty" of value, and therefore is coupled with existing commercial transactions.

You might be interested in

The market supply curve Question 16 options: is found by vertically adding the individual supply curves. represents the sum of t

Juli2301 [7.4K]

The market supply curve represents the sum of the quantities supplied by all the sellers at each price of the good.

<h3>What is the market supply curve?</h3>

The market supply curve is the sum of the individual supply curves of firms. The individual supply curves are added horizontally. The supply curve sloped upward. This shows that there is a positive relationship between price and quantity supplied.

To learn more about supply curves, please check: brainly.com/question/26073189

#SPJ1

8 0

2 years ago

Marlena acquired the following new assets during 2017:

Mila [183]

Answer:

(A) Half-year and (D) Half-year

Explanation:

MACRS stands for Modified Accelerated Cost Recovery System and is the most commonly-used tax depreciation method .Without getting into too much detail, MACRS is accelerated depreciation that allows for a larger deduction while the asset is still new. By comparison, straight-line depreciation gives you the same deduction year after year over the asset's useful life. MACRS cannot be used for intangible property, nor can it be used to depreciate. MACRS convention determines the number of months for which you can claim depreciation during a partial year, either when you first placed the asset in service or when you disposed of it. The mid-month convention only applies to residential rental property, nonresidential real property, and railroad grading or tunnel bore. It simply means that you get a half month's worth of depreciation no matter when that asset was placed into (or taken from) service during that month, whether that was at the beginning, middle, or end of the month. The half-year convention works the same way but instead of the month it goes by the year. In other words, you'll get 6 months' depreciation if the asset was placed into service or disposed of during the year, no matter if it was in January or December.

5 0

3 years ago

Financial data for Greene Company follows:

aksik [14]

The answer is d. 10.2

4 0

2 years ago

A particular security's default risk premium is 3 percent. For all securities, the inflation risk premium is 2.75 percnt and

grandymaker [24]

The calculated value of security's equilibrium rate of return is 12.35%.

Here, security's equilibrium rate of return:

= Real interest rate + inflation risk premium + default risk premium + liquidity risk premium + maturity risk premium

ij* = 2.75% + 5.50% + 3.00% + 0.25% + 0.85%

= 12.35%

Risk Premium & Security's Equilibrium Rate of Return:

Security's equilibrium rate of return is the return required by investors from investment in the security. The equilibrium rate of return is calculated by adding the risk-free rate to the sum of all risk premiums consisting of default risk, liquidity risk, maturity risk and inflation risk.

The inflation risk premium :

is a measure of the premium investors require for the possibility that inflation may rise or fall more than they expect over the period in which they hold a bond.

What is the formula of risk premium?

The estimated return minus the return on a risk-free investment is equal to the risk premium. For example, if the estimated return on an investment is 6 percent and the risk-free rate is 2 percent, then the risk premium is 4 percent.

What is security equilibrium?

Briefly, the requirement for a security equilibrium is that it is "common. knowledge" that no player will settle for a payoff, under any contingency, which is less. than his security level given the occurrence of that contingency.

The question is incomplete. Missing part of question is:

the real risk-free rate is 5.50 percent. The security's liquidity risk premium is 0.25 percent and maturity risk premium is 0.85 percent. The security has no special covenants. Calculate the security's equilibrium rate of return

Learn more about security equilibrium rate of return :

brainly.com/question/8873408

#SPJ4

7 0

1 year ago

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additiona

Aloiza [94]

Fiscal policy.

Fiscal policy involves changes in taxes or spending (government budget) to achieve economic goals. Changing the corporate tax rate would be an example of fiscal policy. fiscal policy: changes in Federal government spending or tax rates for the purpose of influencing the macroeconomy.

Discretionary Fiscal Policy: government spending and tax changes enacted at the time of the problem to alter the economy. Nondiscretionary Fiscal Policy: that set of policies that are built into the system to stabilize the economy (sometimes called automatic stabilizers).

Learn more about Fiscal policy at

brainly.com/question/6583917

#SPJ4

8 0

2 years ago

(a) Explain the quantity theory and (b) how does the theory explains the cause of inflation​

(a) Explain the quantity theory and (b) how does the theory explains the cause of inflation