Inflation premium
Describe the term Inflation premium and how it is the prospect of future inflation?
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Inflation premium: It is the prospect of future inflation, very strongly affects the shape of the term structure. Investors thinking regarding loaning money for different lengths of time recognize that future inflation erodes the value of dollars which will be returned. As an outcome, investors demand compensation for such loss in the form of maximum nominal rates. This extra compensation is termed as inflation premium.
Marginal revenue: This is the change in total revenue by selling one more or a lesser amount of unit of commodity.
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What is the formula for primary deficit? Answer: Primary deficit = fiscal deficit – interest payment.
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