LIQUIDITY PREFERENCE AND MARGINAL EFFICIENCY
Liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by Keynes to explain determination of the interest rate by the supply and demand…
INVESTMENT AND RATE OF INTEREST
• Investment = a change in the stock of capital over a period of time. • Investments are undertaken upto the point at which the yield from an asset cover…
Impacts of Inflation
Inflationary pressure in an economy my generate good effects on the economy, particularly in case of ‘creeping’ or ‘walking’ inflation. Favourable impacts (a) Higher profits : Profits of the producers…
True Semi-inflation
True inflation • It takes place after full employment of all factor inputs in an economy. • In a situation of full employment, the National output becomes perfectly inelastic. •…
Hyper Moderate Inflation
Hyper Inflation • The price level goes on rising at a very fast rate. • Often there happens hourly increase in price level. • It often leads to demonetization. Creeping…
Cost Push Open Inflation
Cost Push Inflation • Inflation may originate from supply side also. • Aggregate demand remaining unchanged, a fall in aggregate supply due to exogenous cause, may lead to increase in…
Forms of Inflation
Inflation may be of different forms, such as: Demand Pull Inflation • When in an economy aggregate demand exceeds aggregate supply. • Aggregate demand may increase due to an increase…
The Quantity Theory by Keynes
• Keynes reformulated the Quantity Theory of Money. • In his opinion the quantity of money does not directly affect price level. • A change in the quantity of money…
Cash Balance Approach
• It states that it is not total money but that portion of cash balance people spend that influences price level. • True people hold cash balance in their hands…
