End of year exam

[AppleXY]

Inflation is mainly (but not solely) rising because of supply constraints which MP is powerless to combat with (only MERs). It makes complete sense to decrease interest rates in order to give consumers a break as consumer confidence (in retail) is pretty bleak.


and as costa said, the time lag effect means that the actual effects of cash rate increases may not actually hit the demand-side immediately, rather in 3 - 6 months or so (variable).

[ReVeL]

Ahh ok.

Thanks alot Costa, marbs and Apple.

[cobby]

Yep.

Well i got those books did you purchase them from bingham?

[costargh]

yeh. me and anagha went halve-ies so shes got the other one.

[cobby]

yeh. me and anagha went halve-ies so shes got the other one.

ohh ok thats cool

[marbs]

me and my mate went through this neap 2008 practice exam, and there was this multiple choice we'd never seen. It went something like;

It the government made a limit on the highest possible value of houses this would cause

a) More demand, thus causing a shortage
b) less demand causing a surplus
c) The equilibrium price would move down
d) ...?

I said A, but my mate said C     

Has anyone seen something like this, and would did they get.

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Also Really easy question that I couldn't think of.

If interest increased what effect would this have on price stability

I said interest rates would lead to lower confidence, thus decreasing consumption spending, lower agg demand, slowing eco activity, and thus slow growth. Which will slow down inflation, and thus aids price stability by keeping prices in the target range of 2-3%.

I then said interest rates would slow investment.. (continued with similar answer)  :idiot2:

What I am missing?

[ReVeL]

I dunno, but couldn't it also increase production costs of firms that have borrowed money?

This could cause firms to raise prices to protect profits, hence adding to cost inflation, and jeapordising price stability. However, this is probably minimal compared to slower demand and would most likely be insignificant.

Meh.

[costargh]

me and my mate went through this neap 2008 practice exam, and there was this multiple choice we'd never seen. It went something like;

It the government made a limit on the highest possible value of houses this would cause

a) More demand, thus causing a shortage
b) less demand causing a surplus
c) The equilibrium price would move down
d) ...?

I said A, but my mate said C     

Has anyone seen something like this, and would did they get.

----------------------------------------------------------------------------------------------------------------

Um... do you know the answer? Do you know what d) is?

If d) was
the equilibrium price would move up, id choose that. hahah

problee wrong

[marbs]

lol nah I don't remember what it was, it wasn't that, and I'm pretty sure it wasn't right.

@revel - thanks thats another effect

[costargh]

There is no reason why the equilibrium price would move down and def no surplus of houses.
its a or d

[marbs]

thought so... thanks for that