New answers tagged

1

Does savings always equal investment? If we are talking about national accounts then yes. Output of closed economy is given by: $$Y = C+I+G \tag{1} $$ Private saving $S_p$ is by definition is disposable that is not consumed (see further explanation in Blanchard et al. Macroeconomics an European Perspective pp 55) so: $$S_p= Y- T-C \tag{2}$$ Public saving $...


1

What was the annual real growth rate in the US from 2010 to 2015? I presume you mean growth rate of output. You can see the quarterly real growth rate in the US from 2010 to 2015 below (source Fred) with average quarterly growth rate being 0.6%: According to the Quantity Equation the US therefore had a yearly real growth of more than 13% in this period? ...


0

" Does that not mean a lot of rupees flowing into circulation in the country?" no. it means other currencies are flowing into the country, eg USD. then locals will go to their banks and exchange USD for RUPEE. There will be no new RUPEES created (unless the crazy scenario of all the banks run out rupee and them needing the central bank to print ...


1

You are wrong/vague here: the rupee (INR), is appreciating against, say, the USD, it possibly means that there is a high demand for the former. If the rupee becomes more expensive w.r.t. the dollar, demand for the rupee usually decreases, as Indian exports are now more expensive to pay for when measured in dollars, and hence fewer people seek to convert ...


2

Yes inflating asset prices does not count as an inflation generally speaking although your friend's explanation is incorrect. Fed is not an authority that decides how inflation is defined. Inflation is generally in academic literature simply defined as (Lebow & Rudd, 2016) Inflation measurement is the process whereby changes in the prices of individual ...


-1

When the Fed sells a 10-year treasury bond, the interest rate is fixed. So if you buy the bond, and keep it for ten years, then you will get a constant interest payment. However, if you sell the bond, then the price will probably be different, so the buyer will receive a different interest rate.


2

In the 70s U.S. Fed policy was in disarray and Fed was not following consistent monetary policy (at least not by present day standards). Generally monetary scholars characterize the Fed monetary policy in the 70s as "go-stop" policy. As argued by Goodfriend (2007): At the heart of the disarray in monetary policy practice in the 1970s was the ...


0

Quoting from the question When the yen being weakened [...] "The automobile won more order as a result..." and more orders made the automobile sector more profitable, hence the higher stock price.


3

During QE what prevents the banks from selling government debt to invest in the stock market instead of lending out the money? Nothing. Depending on which country we are talking about there might be a regulation preventing/limiting some banks investing in a stock market, in order to make banking sector less prone to collapse. For example, Basel rules ...


0

Because of exchange rate and uncovered interest rate parity (UIP). By the UIP the following relationship should hold between nominal interest rates and exchange rates: $$ (1+i_{t}^$) = \frac{E_t(S_{t+1})}{S_t}(1+i_{t}^€)$$ In short, the ratio of expected future nominal exchange rate ($E_t(S_{t+1})$) and current nominal exchange rate ($S_t$) should make the ...


0

(This is an English language question, not an economic one. Next time consider asking at English Language & Usage.) A surprise is negative, if it is a bad surprise (for someone). In this context they probably mean that the revealed value of the indicator (PMI) is lower than they expected, which shows that the economy is in worse shape than they expected. ...


2

Could the Feds objectives be adjusted to decrease or at least not increase wealth inequality? Trivially, answer is yes. Congress could just give Fed a mandate for lowering inequality, the same way as congress could pass a law giving Fed mandate to bring world peace or solve world hunger or conduct space exploration. US is sovereign state and Fed is ...


0

Broadly, the ability to "price gouge" depends on consumer demand being inelastic in the short run - they cannot suddenly switch products to a substitute or delay the purchase. Inelastic goods are a slightly larger category than necessities. Laws about price gouging don't tend to be relevant on elastic goods - sellers simply do not have the power to ...


0

Sunk Cost Definition https://www.accountingtools.com/articles/what-is-a-sunk-cost.html A sunk cost is a cost that an entity has incurred, and which it can no longer recover. Sunk or Stranded Cost http://maloney.people.clemson.edu/customerchoice/sunkor.htm#The%20Estimated%20Value%20of%20Stranded%20Costs%20in%20the%20Electric%20Utility%20Industry 3rd ...


4

Correcting Misconceptions in the Question: Before providing an answer it is worth noting the premise in your question is simply incorrect. You state: I have heard that introducing capital gains taxes would create distortions in investments, and that the optimal tax rate for capital gains is actually 0. But this is not rationale for the famous 0 capital ...


1

If the required downpayment is substantial there will be fewer households if renting is illegal. This means the average number of people per household would be greater. Some people would be living in larger households as they save for a downpayment. If the required downpayment is zero then price volatility would imply that some home sellers have a debt from ...


2

This question is quite convoluted and uses accounting terminology rather than economic terminology (those two are diametrically different most of the time) but based on comments and further qualification I understood that in the first part you are asking whether return on equities are pure economic rent. I am sure you are talking about economic rent because ...


0

Banks lend because it is profitable for them to lend out money. Banks do become less profitable in low interest environment, but they are still empirically able to maintain profitability, although there is evidence that goes hand in hand with some increase in risk taking (e.g. see Bikker & Vervliet 2018). Consequently, the direct answer to your question ...


0

In either case it could work or not work depending on where the money actually ends up. For instance, a lower income individual will have a higher MPC, but they also have incentive to spend their money on the most inexpensive item, which oftentimes is an import - thereby not trickling any money up to American corporations. On the other hand, the main ...


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