--%>
Assignment Help - homework help

Question on price level

Assume the price level and value of the dollar in year 1 are 1.0 and $1.00, respectively. If the price level increases to 1.25 in year 2, determine the new value of the dollar? If somewhat the price level had drop to .50, estimate the value of the dollar? What generalization can you draw through your answer?

E

Expert

Verified

In the primary case, the value of the dollar (in year 2, relative to year 1) is $.80 (= 1/1.25); into the second case the value is $2 (= 1/.50). Generalization: the price level & the value of the dollar are inversely associated.

   Related Questions in Finance Basics

  • Q : Define Fiscal Impact Analysis Fiscal

    Fiscal Impact Analysis: Usually refers to a section of an analysis (example, bill analysis) which recognizes the costs and revenue impact of a proposal and, to the level possible, a particular numeric estimate for appropriate fiscal years.

    		•
  • Q : Shares Assignment Mina Patel has seen

    Assignment Mina Patel has seen attractive advertisements for Dixons Retail plc and its UK-based brands. She is also aware of the intense competition between retailers of electronic and electrical goods, at a time of global economic uncertainty. Mina has recently inherited several thousand pound

    		•
  • Q : Describe patterns of cash flows for

    Describe two patterns of cash flows for a share of common stock. How does the market find out the value of the most common cash flow pattern for common stock?Cash flows for share of common stock contain dividend payments and the price attained f

    		•
  • Q : Describe proprietorship-partnership and

    Briefly describe the terms proprietorship, partnership, and corporation.A proprietorship is a business owned by one person. Two or more people who join together to develop a business make up a partnership. It can be done on an inf

    		•
  • Q : Four major phases of the business cycle

    Normal 0 false false

    		•
  • Q : Cyclical unemployment Suppose that in a

    Suppose that in a specific year the natural rate of unemployment is 5 percent and the actual rate of unemployment is 9 percent. Employ Okun's law to fin out the size of the GDP gap in percentage-point terms. If the nominal GDP is $500 billion in that year, how much ou

    		•
  • Q : What are Feeder Funds Feeder Funds :

    Feeder Funds: For lawful basis accounting purposes, funds into which some taxes or fees are deposited on collection. In some situations administrative costs, collection expenses, and refunds are paid. The balance of such funds is transferable at any t

    		•
  • Q : How do mergers influence consumers How

    How do mergers influence consumers?The effects mergers have on consumers differ widely. There may be some inconvenience and anxiety while a customer's bank or branch is obtained. The issuance of new account numbers and new checks is a familiar h

    		•
  • Q : Define Claim Schedule Claim Schedule :

    Claim Schedule: It is a request from a state department to the State Controller's Office to distribute payment from a legal appropriation or account for a legal state obligation. The claim agenda recognizes the appropriation or account to be charged,

    		•
  • Q : Explain characteristics of an efficient

    Explain characteristics of an efficient market?Market efficiency refers to the speed, ease and cost of trading securities. Within an efficient market, securities can be traded quickly, easily and at low cost. Markets lacking these qualities are

    		•