--%>
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 the term Unappropriated Surplus

    Define the term Unappropriated Surplus: It is an outdated term for that part of the fund balance not reserved for particular purposes.

    		•
  • Q : Calculating the location in assessing

    Normal 0 false false

  • Q : What is Bond Funds Bond Funds : For

    Bond Funds: For legal basis budgeting aims, funds utilized to account for the receipt and disbursement of non-self liquidating common obligation bond proceeds. Such funds do not account for the debt retirement as the liability made by the sale of bond

    		•
  • Q : Examples of high operating leverage

    Give two instances of types of companies likely to contain high operating leverage. Give examples. Long distance telephone companies & electricity generating companies are likely to contain operating leverage. These two kinds of companies

    		•
  • Q : Describe value investing Value

    Value investing is an investment strategy which involves buying securities whose shares appear underpriced by some form(s) of fundamental analysis, like stocks with low Price to Earning or Price to Book value. This strategy basically is of buying stoc

    		•
  • Q : Describe GATT and its goal Describe

    Describe GATT, and its goal? GATT is the General Agreement on Tariffs & Trade. This is a treaty that seeks to decrease trade barriers among participant nations.

    		•
  • Q : Making capital structure decisions In a

    In a perfect capital market, what advice would you give a corporate financial manager on making capital structure decisions? Justify your advice. How and why would your advice change as real world capital market imperfections are introduced?

    Q : Describe benefits of collecting early

    Describe benefits of "collecting early" and how do companies effort to do this? Money contains time value. The sooner cash is gathered, the better. Companies employ regional collection centres and lock boxes to facilitate this.

    		•
  • Q : Describe accumulated depreciation

    Describe accumulated depreciation?Depreciation is the allocation of an asset's primary cost over time. Accumulated depreciation is the sum of all the depreciation cost that has been identified to date.

    		•
  • Q : Describe Reappropriation

    Reappropriation: The expansion of an appropriation’s accessibility for encumbrance and/or expenses beyond its set annihilation date and/or for a new point. Re-appropriations are usually authorized by statute for 1-year at a time however might be

    		•