Advertisements
Advertisements
प्रश्न
What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?
उत्तर
Marginal propensity to import is the fraction of additional income spent on imports.
It is given that M = 60 + 0.06Y
Therefore, marginal propensity to import (m) = 0.06. It reflects induced imports; that is the part of the total imports, which is a function of income.
Since the marginal propensity to import negatively affects the aggregate demand function, when income increases the aggregate demand decreases. This is because the additional income is spent on foreign goods and not on domestic products.
APPEARS IN
संबंधित प्रश्न
Distinguish between the nominal exchange rate and the real exchange rate. If you were to decide whether to buy domestic goods or foreign goods, which rate would be more relevant? Explain.
Suppose it takes 1.25 yen to buy a rupee, and the price level in Japan is 3 and the price level in India is 1.2. Calculate the real exchange rate between India and Japan (the price of Japanese goods in terms of Indian goods).
Suppose the exchange rate between the Rupee and the dollar was Rs. 30=1$ in the year 2010. Suppose the prices have doubled in India over 20 years while they have remained fixed in USA. What, according to the purchasing power parity theory will be the exchange rate between dollar and rupee in the year 2030.
Suppose a bond promises Rs.500 at the end of two years with no intermediate return. If the rate of interest is 5 percent per annum what is the price of the bond.
The managed floating system is a combination of ______
If inflation is higher in country A than in Country B, and the exchange rate between the two countries is fixed, what is likely to happen to the trade balance between the two countries?
A system that allows adjustment in the fixed exchange rate is referred to as ______
______ system allows continuous and regular adjustments in the exchange rate.
Point out a demerit of the fixed exchange rate.
In a system of flexible exchange rates, the exchange rate is determined by the forces of ______
Identify the correctly matched pair from Column A to that of Column B:
| Column A | Column B |
| (1) Private Consumption Expenditure | (a) Market Rate of Interest |
| (2) Private Investment Expenditure | (b) Total Expenditure |
| (3) Autonomous Investment | (c) Construction of Roads |
| (4) Aggregate Demand | (d) Level of personal disposable income |
Point out the merit of the flexible exchange rate.
Exchange rate is the price of a currency expressed in terms of:
Suppose, the price of one UK Pound (£) has increased from ₹ 70 to ₹ 80, owing to market forces.
This means that value of Indian Currency (₹) has ______.
Giving valid reason, state whether the following statement is true or false:
Depreciation of the Indian Currency will lead to promotion of Indian exports.
