VCE Stuff > VCE Economics

Help Jess. O understand stuff about economics/ business and such.

(1/5) > >>

jess3254:
Ok. Please pardon my complete ignorance, as I've never really learnt anything about the economy. I've got a couple of questions...
-Why is it good for a company to have debt to their name? This confuses me.
-What factors influence the value of money in countries? Why does it change so regularly?

Thankee :)

costargh:
-A certain level of debt is good for a business because it means they aren't limited by their own funds to expand their business and finance their operations. Basically it allows a business to grow and to say purchase non-current assets such as vehichles and equipment which can help boost productivity and sales.

-Are you talking about the value of their currency? Well, a few things can influence the price of the currency but I'll explain one situation that can explain an appreciation or depreciation in a currency. It has to do with demand and supply of the currency. In Australia, an increase in mining exports in the past few years to countries such as China has meant that countries wishing to purchase Australian mining products need to purchase it using Australian dollars. Because they need to buy Australian currency to make their purchase, their is a greater demand for Australian currency which means it's value increases because their has been an increase in demand and supply has stayed the same.
The RBA can also manipulate the value of the currency by buying and selling it's own currency. This is known as a 'dirty float'.

Why is your name differnt by the way? lol
I hope I didn't explain anything wrong :( I'm still VCE Economics level lol

Nick:
Oooo I like your currency explanation.

costargh:
Thanks.
But there are definitely other factors that influence the value of a currency. From a supply side, the value of a currency can be seriously depreciated if there is too much supply in the economy. This is best illustrated in Zimbabwe. The government there has continually ordered for printing of more money to pay for soldiers wages and to finance any expenditure. What this has done is directly added to the amount of money circulating in the economy. Effectively, because everyone has more money, the price of all goods and services increased dramatically (inflation is over 10 million % per annum). This has a flow on effect to the exchanges of currencies between say Zimbabwe and USA. Because there is so much money in the Zimbabwean economy, its value compared to USA (say, to buy goods in USA) is significantly less than it was before, thereby making the value of each unit of currency less than it was before.

jess3254:

--- Quote from: costargh on August 27, 2008, 08:28:03 pm ----A certain level of debt is good for a business because it means they aren't limited by their own funds to expand their business and finance their operations. Basically it allows a business to grow and to say purchase non-current assets such as vehichles and equipment which can help boost productivity and sales.

-Are you talking about the value of their currency? Well, a few things can influence the price of the currency but I'll explain one situation that can explain an appreciation or depreciation in a currency. It has to do with demand and supply of the currency. In Australia, an increase in mining exports in the past few years to countries such as China has meant that countries wishing to purchase Australian mining products need to purchase it using Australian dollars. Because they need to buy Australian currency to make their purchase, their is a greater demand for Australian currency which means it's value increases because their has been an increase in demand and supply has stayed the same.
The RBA can also manipulate the value of the currency by buying and selling it's own currency. This is known as a 'dirty float'.

Why is your name differnt by the way? lol
I hope I didn't explain anything wrong :( I'm still VCE Economics level lol

--- End quote ---

Thanks for the explanation Costa! :)
I find the economy extremely confusing. Your description makes sense.

/offtopic but - As for my name, I asked Enwiabe to change it, as it used to be my first name + SIM pin, lol (3254 - I made it that, because on the day I made the account, I got a new SIM card with a pin I kept forgetting... quite exciting, yes.) Now I no longer forget my sim pin. So, I decided to go for a username with less numbers. Very thrilling story indeed.

^ (Your further explanation it quite interesting actually :))

Navigation

[0] Message Index

[#] Next page