Answer to Question #312653 in Macroeconomics for NatalieM

Question

1. Name and to discuss which two types of inflation my commonly referred to in macroeconomics according to the Keynesian approach(2)
2. List two(2) demand side and four(4)) supply-side initiating factors which may be the immediate causes of possible increase in the inflation rate
3. What are the most well-known causes of imbalances in the balance of payments be BoP of a country(9)
4. The monetarists emphasise the inherent stability of the country in the long run. they also further acknowledge that monetary and fiscal policy could have an impact on the short-run. in the long run no large scale government involvement is necessary since the economy is self-stabilizing explain the statement which is based on six classical roots and indicate which of them apply to the monetarist approach

Answer 1

1.

a)Cost-push expansion is the reduction in the total stockpile of labor and products coming from an expansion in the expense of creation.

b)Demand-pull inflation is the expansion in total interest, sorted by the four segments of the macroeconomy: families, business, state run administrations, and unfamiliar buyers.

2.

a)Factors that cause Demand-Pull inflation

i) Increase in the government spending.

ii)Depreciation of local currency.

b)Factors that cause Cost-Push inflation

i)Increase in the price of raw materials.

ii)Increase in government taxes.

iii)Increase in the factors of production such labor, land etc.

iv)Increase in the price of imports.

3.Causes of imbalance of payments

(a) Changes in fashions, tastes and preferences of the people bring disequilibrium in BOP by influencing imports and exports.

(b) High population growth in poor countries adversely affects their BOP because it increases the needs of the countries for imports and decreases their capacity to export.

4.Monetarists accept that the economy is automatic, changes in M and V can influence total interest; and changes in M and V will change P and Genuine Gross domestic product in the short run, yet just costs over the long haul. Monetarists likewise accept that adjustments of speed are inadequate to counterbalance changes in M, since they accept that speed is generally steady and unsurprising.