--%>
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 : How societys interests can affect

    Normal 0 false false

    		•
  • Q : Define Legislature Legislature,

    Legislature, California: Two-house bodies of elected representatives vested with the accountability and power to make laws affecting the state (that is, except as limited by the veto power of the Governor).

    		•
  • Q : Slope of the budget line and the

    Consider someone won $15 on a Lotto Canada ticket at the local 7-Eleven & decided to spend all the winnings on bags of peanuts and candy bars. The cost of candy bars is estimated as $.75 and the cost of peanuts is $1.50. Plot the data in this table as a budget li

    		•
  • Q : Absolute and relative sizes of the

    Normal 0 false false

    		•
  • Q : Describe Schedule 8 Schedule 8 : A

    Schedule 8: A detailed listing produced from the State Controller's Office payroll records for a department of its past, present, and budget year positions as of June 30 and updated for the July 1. This listing should be reconciled with each and every

    		•
  • Q : Define Executive Branch Executive

    Executive Branch: One of the three branches of state government, accountable for administering and implementing the state's laws and programs. The Governor's Office and those individuals, departments, and offices reporting to it (that

    		•
  • Q : Expected rate of return Normal 0 false

    Normal 0 false false

    		•
  • Q : Describe time value of money Describe

    Describe time value of money?The time value of money means that money you have in your hand today is worth more than money you expect to obtain in the future. Likewise, money you have to pay out today is a greater burden than the similar a

    		•
  • Q : Define Referendum Referendum: This is

    Referendum: This is the power of the electors to support or reject statutes or parts of statutes, with particular exceptions and meeting particular deadlines and number of voter’s signatures.

    		•
  • Q : Multiplier effect Normal 0 false false

    Normal 0 false false

    		•