Advanced Macroeconomic Formulas and Policy Concepts
Core Macroeconomic Identities and Inflation
The Quantity Identity of Money
The Quantity Identity of Money is expressed as: M × V = P × Y
- M = Money Supply
- V = Velocity of Money
- P = Price Level
- Y = Real GDP
- P × Y = Nominal GDP
Calculating Inflation and Growth Rates
To calculate inflation, multiply new prices by the total number of old goods.
The growth rate form of the Quantity Identity is: m + v = π + y
- m = Money supply growth rate
- v = Velocity growth rate
- π (pi) = Inflation rate
- y = Real GDP growth rate
Assuming
Read MoreCore Principles of International Trade and Finance
Benefits and Disadvantages of Specialisation
Advantages of Specialisation
- Increased Output: As production becomes more efficient, output is maximised with the same amount of resources.
- Greater Variety for Consumers: Consumers gain access to a greater variety of higher-quality products from around the world.
- Economic Growth: Specialisation and international trade increase the size of the market, allowing for economies of scale and boosting the GDP.
- Enhanced Efficiency: It leads to greater overall efficiency,
Development Economics: Key Concepts, Reforms, and Global Issues
Critical Discussion of Land Reform Measures in Developing Countries
Land reforms in developing countries, aimed at addressing inequitable land ownership and control, have seen various approaches, including redistribution, tenancy reforms, and consolidation. While these measures have been intended to improve agricultural productivity, reduce poverty, and promote social justice, their effectiveness and impacts are often debated. Critically, the successes and failures of land reforms depend on a complex
Read MoreBusiness Combinations, Mergers, and Government Regulation
What is a Business Combination?
A business combination refers to the process by which two or more companies join together to form a single entity, either by merging, acquiring, or consolidating with each other. Business combinations can take different forms, including mergers, acquisitions, amalgamations, or takeovers. The goal is often to increase market power, achieve synergies, or expand operations.
Types of Business Combinations
Business combinations can be broadly classified into the following
Read MoreFailures of Planning and India’s 1991 LPG Economic Reforms
Failures of Pre-1991 Economic Planning
Increase in Poverty
- The number of people who fail to get the basic necessities of life was increasing.
- The policies adopted by the government till 1990 were very rigid and were unable to generate sufficient employment opportunities and income.
High Rate of Inflation
- Despite some progress shown by policies undertaken by the government till 1991, it was observed that the government could not control the persistent rise in prices.
- The price level increased from nearly
Global Economic Balances: Deficits, Surpluses, and Interest Parity
Balance of Payments: Deficits & Surpluses
If we sum all debits and credits in the current account, private capital account, and public capital account, the total should theoretically be zero. However, this seldom happens in practice. Numerous transactions are missed or intentionally hidden from the accounting process.
If the sum of credits and debits in the current account, private capital account, and public capital account is not zero, an offsetting entry, known as the *statistical discrepancy*
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